Old and New Methods for Lost-Sales Inventory Systems

Paul Zipkin ()
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Paul Zipkin: Fuqua School of Business, Duke University, Durham, North Carolina 27708

Operations Research, 2008, vol. 56, issue 5, 1256-1263

Abstract: We consider the notoriously difficult discrete-time inventory model with stochastic demands, a constant lead time, and lost sales. We show that the effective state space is a relatively manageable compact set. Then, we test various plausible heuristics. We find that several perform reasonably well, although none is perfect. However, the standard base-stock policy (a direct analogue of the optimal policy for a backlog system) performs badly. We also show that the optimal cost is increasing in the lead time.

Keywords: inventory; lost sales; dynamic programming (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (31)

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