Lost-sales inventory theory: A review

Marco Bijvank*, Iris F. A. Vis

*Corresponding author for this work

Research output: Contribution to journalReview articleAcademicpeer-review

116 Citations (Scopus)

Abstract

In classic inventory models it is common to assume that excess demand is backordered. However, studies analyzing customer behavior in practice show that most unfulfilled demand is lost or an alternative item/location is looked for in many retail environments. Inventory systems that include this lost-sales characteristic appear to be more difficult to analyze and to solve. Furthermore, lost-sales inventory systems require different replenishment policies to minimize costs compared to backorder systems. In this paper, we classify the models in the literature based on the characteristics of the inventory system and review the proposed replenishment policies. For each classification and type of replenishment policy we discuss the available models and their performance. Furthermore, directions for future research are proposed. (C) 2011 Elsevier B.V. All rights reserved.

Original languageEnglish
Pages (from-to)1-13
Number of pages13
JournalEuropean Journal of Operational Research
Volume215
Issue number1
DOIs
Publication statusPublished - 16-Nov-2011

Keywords

  • Inventory
  • Lost sales
  • Replenishment policies
  • Classification of literature
  • SERVICE-LEVEL CONSTRAINTS
  • BASE-STOCK POLICIES
  • MULTIPRODUCT KANBAN SYSTEMS
  • FUTURE-SUPPLY UNCERTAINTY
  • OPTIMAL ORDERING POLICIES
  • PRIORITY DEMAND CLASSES
  • POSITIVE LEAD-TIMES
  • SET-UP COSTS
  • PERISHABLE INVENTORY
  • JOINT INVENTORY

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