An inventory model with uncertain demand and lost sales reduction under service level constraint

S. Hemapriya () and R. Uthayakumar ()
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S. Hemapriya: The Gandhigram Rural Institute - Deemed University
R. Uthayakumar: The Gandhigram Rural Institute - Deemed University

International Journal of System Assurance Engineering and Management, 2017, vol. 8, issue 2, No 68, 1399-1418

Abstract: Abstract In practice, the quantity received may not match with the quantity ordered, due to various reasons such as rejection during inspection, damage or breakage during transportation, human errors in counting etc. Subsequently, the managers often must make decisions under uncertain quantity received circumstances. This paper explores the feasibility of reducing ordering cost and lost sales caused by stock-out. In this study, we examine the continuous review inventory model with shortages include the case where the quantity received is uncertain in which the lead time and lost sales rate are decision variables and also with service level constraint. Here we consider the lead time crashing cost is a function of negative exponential lead time. The objective of this study is to minimize the joint expected total cost by simultaneously optimizing the order quantity and lost sales rate. An efficient algorithm for finding the optimal solution is developed and numerical examples are given to illustrate the results.

Keywords: Inventory model; Lost sales; Crashing cost; Ordering cost reduction; Investment; Shortage (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s13198-017-0611-y

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