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Optimal stochastic inventory control with deterioration and partial backlogging/service-level constraints

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  • Yang Tan
  • Michael X. Weng

Abstract

A new inventory system with finite planning horizon is studied for deteriorating items. The system is under periodic review and there is a positive fixed order cost associated with any placed order. Customer demand is stochastic and a constant fraction of any positive leftover stock is deteriorated at the end of each period. This study first considers that any unsatisfied demand is partially backlogged and fulfilled immediately as a new order arrives. The optimal conditions under which a (s, S) policy holds are successfully derived. Then the effect of partial backlogging is replaced by incorporating the service-level constraints so that the explicit order quantities are obtained by reformulating the problem as a mixed-integer programming model.

Suggested Citation

  • Yang Tan & Michael X. Weng, 2013. "Optimal stochastic inventory control with deterioration and partial backlogging/service-level constraints," International Journal of Operational Research, Inderscience Enterprises Ltd, vol. 16(2), pages 241-261.
    • Handle: RePEc:ids:ijores:v:16:y:2013:i:2:p:241-261
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    Cited by:

    1. Sandun C. Perera & Suresh P. Sethi, 2023. "A survey of stochastic inventory models with fixed costs: Optimality of (s, S) and (s, S)‐type policies—Discrete‐time case," Production and Operations Management, Production and Operations Management Society, vol. 32(1), pages 131-153, January.

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