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Appropriate Inventory Policies When Service Affects Future Demands

In: Cross-Functional Inventory Research

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  • Lawrence W. Robinson

Abstract

A major problem in using penalty costs to derive an inventory stocking policy is the accurate assessment of the lost goodwill of a dissatisfied customer. In this chapter, the lost goodwill is explicitly manifested as a drop in future demand, so that the optimal ordering policy balances current holding costs against foregone future profits. Two special cases are examined for which a stationary stocking policy is optimal. These two cases provide bounds for the optimal stocking policy for a very general class of problems where the demand variability changes with the mean.

Suggested Citation

  • Lawrence W. Robinson, 2016. "Appropriate Inventory Policies When Service Affects Future Demands," World Scientific Book Chapters, in: Srinagesh Gavirneni (ed.), Cross-Functional Inventory Research, chapter 5, pages 135-167, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789813144347_0005
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    Citations

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    Cited by:

    1. Deligiannis, Michalis & Liberopoulos, George & Benioudakis, Myron, 2023. "Dynamic supplier competition and cooperation for buyer loyalty on service," International Journal of Production Economics, Elsevier, vol. 255(C).
    2. Liberopoulos, George & Deligiannis, Michalis, 2022. "Optimal supplier inventory control policies when buyer purchase incidence is driven by past service," European Journal of Operational Research, Elsevier, vol. 300(3), pages 917-936.

    More about this item

    Keywords

    Inventory Management; Cross-Functional Approach; Business Strategy;
    All these keywords.

    JEL classification:

    • M19 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Other

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