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Abstract
Continuous review system Lead Time L Fixed Duration T Part of the duration can be either Ta or Te Where Ta>Te; When inventory Reaches the level r order size Q is released.

Reorder point

Abstract
If the net inventory at time T after the order release is equal to or smaller than re , the order is expedited at a cost comprising a fixed cost per unit and the lead time is L=T+Te, otherwise L=T+Ta,

Decision Variables
Order Quantity Reorder Point Order Expediting Point Q r re

The Aim
To find inventory policy variables Q, r and re That minimized Average Cost rate.

Introduction
When lead times are not negligible, random demand during lead time might lead to shortage. If shortage implies high costs, stockouts can be reduced by issuing emergency orders. Lead time usually comprises components such as order preparation, order delivery, manufacturing and transportation.

Introduction
In some cases, options exist for reducing the duration of some of these components. For example; There are cases in which transportation can be carried out in either slower or faster mode such as by air and by truck. In most cases achieving the shorter lead time implies a cost premium.

Introduction

Introduction
However, rather than considering a second ( emergency) order we analyze the option of expediting the deliveryof the outstanding order at an additional cost. We consider a continuous review inventory system in which the lead time L includes a part of fixed duration. T and a part whose duration can be either Ta or Te where Ta>Te. When the net inventory reaches the reorder point r an order of size Q is released.

Introduction
If the net inventory at time T after the order release is equal to or smaller than re, the order is expedited at a cost comprising a fixed cost Ke and a cost per unit ce and the lead time is L= T+Te Otherwise the lead time is L=T+Ta. Therefore, the decision varibles consideret are the order quantity Q, the order reorder point r and the order expediting point re.

Introduction
Aim is to find the inventory policy variables Q, r and re that minimize average cost rate.

Notation
Q Ka Ke Ca Ce H Order Quantity Fixed ordering Cost per order Fixed expediting cost per order Acqusition cost per unit Expediting cost per unit inventory holding cost per unit time unit Penalty cost per unit short

Notation
B Expected number of units backordered in a cycle Demand rate ( units demanded per unit of time) H Expected on hand inventory per cycle in units times time units. Ha Expected on hand inventory in cycles without order expediting He Expected on hand inventory in cycles with order expediting P Probability of expediting an order

Notation
I(t) Net inventory at time t after the release of the normal order of the cycle X(t) Demand accumulated up to time t f(x,t) Probability density function of the demand x during a time inveterval of size t ( f(x,t)=0 whenever x<0)

The Model
If I(t)re the inventory level at the end of the constant part of the lead time is smaller or equal than the order expediting point re, then at an additional cost the the order is expedited, to be delivered at T+Te. Otherwise the order is delivered at T+Ta. We will state the problem in function R=r-re and r instead of in function of re and r. We will assume r0 and rre thus R0.

The Model

The Model

The model

The model

The model

The Model
Inventory Level

r
a

re T One cycle Expected inventory levels in cycles without order expediting Ta

Time

The Model

Equations

Equations

The Model

The Model
4. Repeat steps 5 and 6 until no changes occur in Q and r: 5. Find r from Eq. (2). 6. Find Q from Eq. (1).

The Model
7. Set QR = Q and rR = r: 8. Find R* such that EC(QR* ; rR* ;R*)= Min R EC(QR, rR,R); then QR* ; rR* ;R* is the solution of the algorithm.

Validation of the model

Table 1
Comparison of analytical and simulated result

Table 2
Comparison of analytical and simulated results for a different back order cost rate

Table 3
Optimal inventory policies for different expediting costs

Table 4
Optimal inventory policies for different values Te while holding T and Ta constant

Table 5
Optimal inventory policies for different values of Ta while holding T and Te constant

Table 6
Optimal inventory policies for different values of T while holding T+Ta and Ta/Te constant

Table 7
Optimal inventory policies for different values of Ta while holding T+Ta and Te constant,for two values of Ke

Conclusions
In this paper we have developed a model to find the optimal inventory policy when there is an expediting option.We have presented an algorithm to obtain the policy variables that attain a global minimal average cost rate when the inventory policy decision variables are integers.We have also discussed the case when the decision variables are real valued.

Conclusion
We have verified extensively the model by simulation .In the numerical examples we have studied the behavior of our model with respect to the variation of some parameters.That analysis highlights how the proposed model be used ,not only to establish the inventory management policy for a given set of parameters but also to understand how the system would be affected by changes in these parameters, once the inventory policy is a adjusted accordingly.