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Return policies for an inventory system with positive and negative demands

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  • Daniel P. Heyman

Abstract

We consider a single item inventory system with positive and negative stock fluctuations. Items can be purchased from a central stock, n items can be returned for a cost R + rn, and a linear inventory carrying cost is charged. It is shown that for minimizing the asymptotic cost rate when returns are a significant fraction of stock usage, a two‐critical‐number policy (a,b) is optimal, where b is the trigger level for returns and b – a is the return quantity. The values for a and b are found, as well as the operating characteristics of the system. We also consider the optimal return decision to make at time zero and show that it is partially determined by a and b.

Suggested Citation

  • Daniel P. Heyman, 1978. "Return policies for an inventory system with positive and negative demands," Naval Research Logistics Quarterly, John Wiley & Sons, vol. 25(4), pages 581-596, December.
    • Handle: RePEc:wly:navlog:v:25:y:1978:i:4:p:581-596
    DOI: 10.1002/nav.3800250402
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    Cited by:

    1. Ki Ling Cheung & Alex X. Zhang, 1999. "The impact of inventory information distortion due to customer order cancellations," Naval Research Logistics (NRL), John Wiley & Sons, vol. 46(2), pages 213-231, March.
    2. Hsien-Jen Lin, 2015. "Two-echelon stochastic inventory system with returns and partial backlogging," International Journal of Systems Science, Taylor & Francis Journals, vol. 46(6), pages 966-975, April.
    3. Yonit Barron, 2024. "Shortage Policies for a Jump Process with Positive and Negative Batch Arrivals in a Random Environment," Mathematics, MDPI, vol. 12(9), pages 1-30, April.
    4. Gökbayrak, Esra & Kayış, Enis, 2023. "Single item periodic review inventory control with sales dependent stochastic return flows," International Journal of Production Economics, Elsevier, vol. 255(C).

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