Optimal Base-Stock Inventory-Management Policies of Cement Retailers under Supply-Side Disruptions

Manik Debnath, Sanat Kr. Mazumder,Md Billal Hossain,Arindam Garai,Csaba Balint Illes

Mathematics(2023)

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Abstract
The current study aims to identify some optimal base-stock inventory-management policies that maximize the expected long-run profitability of cement retailers under potential supply-side disruptions. Unlike existing articles, the proposed economic order-quantity model considers periodically varying random demand rates of deteriorating items together with partially back-ordered shortages in the face of those random disruptions. This study computes the global concavity to execute the exemplary aspect for the optimal base-stock level under a slew of cost components and a fixed cycle length. Regarding the optimal pricing-related policies, this study proposes that cement retailers should stock from nearby supplier points. Unlike existing articles, we find that changes to either the unit-holding cost or the unit-lost sales cost have hardly any determining effect on the long-run profitability of retailers. When supply-side disruptions are more likely to occur during peak seasons, this study advocates for a planned capacity addition and higher base-stock levels of cement bags.
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Key words
periodic-review inventory model, base-stock policy, supply-side disruption, varying demand rate, deterioration, partial back-ordering
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