Optimal stochastic inventory control with deterioration and partial backlogging/service-level constraints

Yang Tan and Michael X. Weng

International Journal of Operational Research, 2013, vol. 16, issue 2, 241-261

Abstract: A new inventory system with finite planning horizon is studied for deteriorating items. The system is under periodic review and there is a positive fixed order cost associated with any placed order. Customer demand is stochastic and a constant fraction of any positive leftover stock is deteriorated at the end of each period. This study first considers that any unsatisfied demand is partially backlogged and fulfilled immediately as a new order arrives. The optimal conditions under which a (s, S) policy holds are successfully derived. Then the effect of partial backlogging is replaced by incorporating the service-level constraints so that the explicit order quantities are obtained by reformulating the problem as a mixed-integer programming model.

Keywords: deteriorating items; periodic review; stochastic demand; partial backlogging; service level constraints; operational research; optimisation; stochastic inventory control; finite planning horizon; mixed-integer programming. (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijores:v:16:y:2013:i:2:p:241-261

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