Sourcing from suppliers with random yield for price-dependent demand

Wen Chen, Qi Feng, Sridhar Seshadri

Research output: Contribution to journalArticlepeer-review


We study a multi-period inventory planning problem. In each period, the firm under consideration can source from two possibly unreliable suppliers for a price-dependent demand. Our analysis suggests that the optimal procurement policy is neither a simple reorder-point policy nor a complex one without any structure, as previous studies suggest. Instead, we prove the existence of a reorder point for each supplier. No order is placed to that supplier for any inventory level above the reorder point and a positive order is issued to that supplier for almost every inventory level below the reorder point. We characterize conditions under which the optimal policy reveals monotone response to changes in the inventory level. Furthermore, two special cases of our model are examined in detail to demonstrate how our analysis generalizes a number of well-known results in the literature.

Original languageEnglish (US)
Pages (from-to)557-579
Number of pages23
JournalAnnals of Operations Research
Issue number1
StatePublished - Sep 2013
Externally publishedYes


  • Inventory control
  • Multiple sourcing
  • Pricing
  • Random yield

ASJC Scopus subject areas

  • Decision Sciences(all)
  • Management Science and Operations Research


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