Lost-sales inventory systems with a service level criterion

Marco Bijvank and Iris F.A. Vis

European Journal of Operational Research, 2012, vol. 220, issue 3, 610-618

Abstract: Competitive retail environments are characterized by service levels and lost sales in case of excess demand. We contribute to research on lost-sales models with a service level criterion in multiple ways. First, we study the optimal replenishment policy for this type of inventory system as well as base-stock policies and (R,s,S) policies. Furthermore, we derive lower and upper bounds on the order-up-to level, and we propose efficient approximation procedures to determine the order-up-to level. The procedures find values of the inventory control variables that are close to the best (R,s,S) policy and comply to the service level restriction for most of the instances, with an average cost increase of 2.3% and 1.2% for the case without and with fixed order costs, respectively.

Keywords: Inventory; Lost sales; Service level; Base-stock policy; Optimal policy (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:220:y:2012:i:3:p:610-618

DOI: 10.1016/j.ejor.2012.02.013

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