Optimal Inventory Policy Involving Ordering Cost Reduction, Back-Order Discounts, and Variable Lead Time Demand by Minimax Criterion

Jong-Wuu Wu, Wen-Chuan Lee and Chia-Ling Lei

Mathematical Problems in Engineering, 2009, vol. 2009, 1-19

Abstract:

This paper allows the backorder rate as a control variable to widen applications of a continuous review inventory model. Moreover, we also consider the backorder rate that is proposed by combining Ouyang and Chuang (2001) (or Lee (2005)) with Pan and Hsiao (2001) to present a new form. Thus, the backorder rate is dependent on the amount of shortages and backorder price discounts. Besides, we also treat the ordering cost as a decision variable. Hence, we develop an algorithmic procedure to find the optimal inventory policy by minimax criterion. Finally, a numerical example is also given to illustrate the results.

Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:hin:jnlmpe:928932

DOI: 10.1155/2009/928932

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