Note: Optimal Policies for Serial Inventory Systems Under Fill Rate Constraints

Sven Axsäter ()
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Sven Axsäter: Department of Industrial Management and Logistics, Lund University, P.O. Box 118, SE-22100 Lund, Sweden

Management Science, 2003, vol. 49, issue 2, 247-253

Abstract: A continuous review serial production/distribution system with discrete compound Poisson demand for the end product is considered. Unmet demand is back-ordered. Production/transportation times are constant. All deliveries from one stage to the next must be multiples of given batch sizes. We consider the problem of minimizing the holding costs under a fill rate constraint. Using recent results by Chen (2000), we show that under a set of restricted but plausible assumptions, the optimal policy is an echelon stock multistage (R, nQ) policy with one of the reorder points varying over time. We provide a simple procedure for the determination of the optimal policy.

Keywords: supply chain inventories; service constraints; stochastic demand (search for similar items in EconPapers)
Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:49:y:2003:i:2:p:247-253

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