On the impact of supply uncertainty on inventory decisions: EOQ-based models

Inventory management is influenced by both demand and supply uncertainty, with the latter often manifesting as yield variability, where delivered quantities deviate from orders. This study develops a unified framework to analyse four key sources of variability in order quantities: (1) random yield, where deliveries differ from the order quantity; (2) random quality, where received items include defects identified through post-delivery inspection; (3) random capacity, where supplier limitations prevent full order fulfillment; and (4) supply disruption, where the order fails to materialise. Within an EOQ context and under an (s,S) policy, we derive a common long-run average cost formulation for all four uncertainty types and determine the cost-minimising inventory policies. We conduct both theoretical and numerical comparisons, examining impacts on total cost, optimal policy parameters, and replenishment intervals. Beyond providing a unified perspective on yield-related supply uncertainty, our findings offer guidance for supplier evaluation and selection.