Value of disruption duration information

Date

2026-9-04

Author

Mercan, Nilsu

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Supply disruptions can increase inventory costs and interrupt supply operations. This thesis focuses on an infinite-horizon, continuous-review inventory system with deterministic and stationary demand. An unreliable supplier alternates between available (“ON”) and disrupted (“OFF”) states, and unmet demand is backordered. We investigate the value of disruption duration information. We first consider a single-supplier setting. A no-information model, where the retailer has no information about the current disruption, is analyzed as a benchmark. We then extend the benchmark model by allowing a single additional order opportunity based on disruption duration information. Depending on the realized disruption, the retailer chooses whether to utilize the additional order. The long-run expected cost rates are derived using Renewal Reward Theorem. Since the expected cost rate of the with-information model cannot be evaluated in a tractable form, three approximations are proposed and evaluated numerically. We next study a two-supplier setting with a reliable but more expensive second supplier. In the no-information model, the reliable supplier serves as a contingent sourcing option during disruptions. We then incorporate disruption duration information into sourcing decisions, allowing the retailer to determine whether and how extensively to use the reliable supplier. The long-run expected cost rates are derived using Renewal Reward Theorem. We conduct a computational study to evaluate the approximations for the single-supplier with-information model and compare the benchmark and proposed with-information models in terms of ordering and sourcing decisions, and economic outcomes. Sensitivity analyses are also performed to examine the effects of the problem parameters.

Subject Keywords

Supply disruption, Disruption duration information, Contingent sourcing, Renewal process

URI

https://hdl.handle.net/11511/121042

Collections

Graduate School of Natural and Applied Sciences, Thesis