A TWO-PRODUCT INVENTORY SYSTEM WITH PRODUCT INTERACTION

Abstract

In this paper, we study a two-component continuous review inventory system. We assume that demand occurs according to a Poisson process and that a demand can be satisfied only if both the components are available in the inventory. Back-orders are not permitted. We assume that the lead-time distribution of one product is arbitrary and the other is exponential. Identifying the underlying process as a semi-regeneration process we find the stationary distribution of the inventory level, the performance measures such as mean stationary rate of number of lost demands, the demands and the reorders made. A numerical example illustrates the results.