Lost-sales inventory systems with a service level criterion

Marco Bijvank*, Iris F. A. Vis

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

28 Citations (Scopus)

Abstract

Competitive retail environments are characterized by service levels and lost sales in case of excess demand. We contribute to research on lost-sales models with a service level criterion in multiple ways. First, we study the optimal replenishment policy for this type of inventory system as well as base-stock policies and (R,s,S) policies. Furthermore, we derive lower and upper bounds on the order-up-to level, and we propose efficient approximation procedures to determine the order-up-to level. The procedures find values of the inventory control variables that are close to the best (R,s,S) policy and comply to the service level restriction for most of the instances, with an average cost increase of 2.3% and 1.2% for the case without and with fixed order costs, respectively. (C) 2012 Elsevier B.V. All rights reserved.

Original languageEnglish
Pages (from-to)610-618
Number of pages9
JournalEuropean Journal of Operational Research
Volume220
Issue number3
DOIs
Publication statusPublished - 1-Aug-2012

Keywords

  • Inventory
  • Lost sales
  • Service level
  • Base-stock policy
  • Optimal policy
  • BASE-STOCK POLICIES
  • OPTIMAL ORDERING POLICIES
  • LEAD TIMES
  • CONSTRAINTS
  • COSTS
  • DEMAND
  • MODELS

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