A Periodic-Review Base-Stock Inventory System with Sales Rejection

Yanyi Xu (), Arnab Bisi () and Maqbool Dada ()
Additional contact information
Yanyi Xu: School of Management, Shanghai University, Shanghai 200444, China
Arnab Bisi: Krannert School of Management, Purdue University, West Lafayette, Indiana 47907
Maqbool Dada: The Johns Hopkins Carey Business School, Baltimore, Maryland 21201

Operations Research, 2011, vol. 59, issue 3, 742-753

Abstract: We consider a system in which an order is placed every T periods to bring the inventory position up to the base stock S . We accept demand until the inventory position reaches a sales rejection threshold M . Our objective is to find the optimal values of S and M that minimize the long-run average cost per period. We establish the stationary distribution of our system and develop structural properties of the optimal solution that facilitate computation. In particular, we show that in an optimal solution, the optimal value of M is nonnegative under some reasonable conditions. Hence, in our model a mixture of backorders and lost sales may occur. Additionally, we compare our system against traditional systems in which demand during stockouts is either fully backordered or lost.

Keywords: stochastic inventory models; (R; T) systems; base stock systems; backorders; lost sales (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://dx.doi.org/10.1287/opre.1110.0921 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:oropre:v:59:y:2011:i:3:p:742-753

Access Statistics for this article

More articles in Operations Research from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().