Two Flexible Inventory Replenishment Strategies for a Make-to-Order Production-Inventory System: Performance Comparison

We present two types of component replenishment strategies for a make-to-order manufacturer which can be implemented through the supply contract. Under the first strategy, the manufacturer contracts with multiple suppliers that have a common lead time distribution with the same mean, and the order quantity is the same across the suppliers. The second strategy is built on the contract with a single supplier which commits to supply the component subject to the integer multiple of the basic order quantity. They are numerically compared using the dynamic programming equations. We provide the explanations and insights to help understanding the impact of problem parameters on the optimal performance.