Production and Operations Management 2016

Dual Sourcing Inventory Systems: On Optimal Policies and the Value of Costless Returns

Ganesh Janakiraman¹; Sridhar Seshadri²

¹ The University of Texas at Dallas · ² Indian School of Business

Abstract

We study dual sourcing inventory systems with backordering and with stationary, stochastic demands. The two supply sources differ in their unit prices and lead times. We focus on the option of making costless returns to the cheaper, longer leadtime supplier. We show that the value of this option is zero. Our analysis leading to this result includes the derivation of several structural properties of the optimal policies for dual sourcing systems with and without the return option.

DOI

10.1111/poms.12636

Sources

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APA 7 MLA 9 Chicago (author–date) Harvard Elsevier Harvard (JFE, JBF…) The Accounting Review Academy of Management American Marketing Association INFORMS (Management Science) Copy citation Copied ✓