An easy derivation of the order optimality condition for inventory systems with backordering

Ruud Teunter and Rommert Dekker

No EI 2001-41, Econometric Institute Research Papers from Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute

Abstract: We analyze the classical inventory model with backordering, where the inventory position is controlled by an order level, order quantity policy. The cost for a backorder contains a fixed and a time-proportional component. Demand can be driven by any discrete process. Order lead times may be stochastic and orders are allowed to cross. The optimality condition for the order-level, given some predetermined order quantity, is derived using an easy and insightful marginal cost analysis. It is further shown how this condition can easily be (approximately) rewritten in well-known forms for special cases.

Keywords: backordering; classical inventory model; optimality condition (search for similar items in EconPapers)
Date: 2001-11-28
References: Add references at CitEc
Citations:

Downloads: (external link)
https://repub.eur.nl/pub/1712/feweco20011128150258.pdf (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:ems:eureir:1712

Access Statistics for this paper

More papers in Econometric Institute Research Papers from Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute Contact information at EDIRC.
Bibliographic data for series maintained by RePub ( this e-mail address is bad, please contact ).