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On the estimation of on-hand stocks for base-stock policies and lost sales systems and its impact on service measures

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  • Manuel Cardós
  • Ester Guijarro
  • Eugenia Babiloni

Abstract

This paper focuses on computing on-hand stock levels at the beginning of a replenishment cycle for a lost sales inventory system with periodic reviews and discrete demand. A base-stock policy is used for replenishments. The literature provides an Exact method which requires a huge computational effort, and two closed-form approximate methods that arise from the backordering case, the Non-stockout and the Bijvank & Johansen. In this paper we propose three new and closed-form approaches that explicitly consider the lost sales assumptions: the Adjusted Non-stockout, the Polar Opposite and the 1-Step methods. Existing and proposed methods are evaluated in terms of their accuracy when computing the cycle service level and the fill rate. In this sense, results show that the Bijvank & Johansen and 1-Step methods provide similar performance but present different behaviours in terms of under or over estimating service measures that have different implications on the design of stock policies.

Suggested Citation

  • Manuel Cardós & Ester Guijarro & Eugenia Babiloni, 2017. "On the estimation of on-hand stocks for base-stock policies and lost sales systems and its impact on service measures," International Journal of Production Research, Taylor & Francis Journals, vol. 55(16), pages 4680-4694, August.
    • Handle: RePEc:taf:tprsxx:v:55:y:2017:i:16:p:4680-4694
    DOI: 10.1080/00207543.2017.1279759
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    References listed on IDEAS

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    4. Guijarro, Ester & Cardós, Manuel & Babiloni, Eugenia, 2012. "On the exact calculation of the fill rate in a periodic review inventory policy under discrete demand patterns," European Journal of Operational Research, Elsevier, vol. 218(2), pages 442-447.
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    6. Marco Bijvank & Woonghee Tim Huh & Ganesh Janakiraman & Wanmo Kang, 2014. "Robustness of Order-Up-to Policies in Lost-Sales Inventory Systems," Operations Research, INFORMS, vol. 62(5), pages 1040-1047, October.
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    9. Diels, Jana Luisa & Wiebach, Nicole, 2011. "Customer reactions in Out-of-Stock situations: Do promotion-induced phantom positions alleviate the similarity substitution hypothsis?," SFB 649 Discussion Papers 2011-021, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
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    1. Eugenia Babiloni & Ester Guijarro & Juan R. Trapero, 2023. "Stock control analytics: a data-driven approach to compute the fill rate considering undershoots," Operational Research, Springer, vol. 23(1), pages 1-25, March.

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