Optimal order policies for dual-sourcing supply chains under random supply disruption

Abstract

In this paper, we investigate inventory and order strategies of a two-echelon supply chain, which is composed of two unreliable suppliers that are subject to random disruption. We develop the gross weighted profit benchmark model and the service level constrained model of the supply chain, respectively. We derive the retailer's optimal order quantity and analyze the retailer' optimal order policy and also obtain the analytical closed-form solutions. In addition, some numerical examples are provided to illustrate the effect of disruption time, disruption probability and fill rate on the optimal decisions and expected profit.