Title: Interchanging fill rate constraints and backorder costs in inventory models

 

Author: Jiang Zhang; Matthew J. Sobel

 

Address: Department of Management, Marketing, and Decision Sciences, School of Business, Adelphi University, Garden City 11530, New York, USA ' Department of Operations, Weatherhead School of Management, Case Western Reserve University, 10900 Euclid Avenue, Cleveland, Ohio 44106, USA

 

Journal: Int. J. of Mathematics in Operational Research, 2012 Vol.4, No.4, pp.453 - 472

 

Abstract: This paper shows that fill rate constraints and backorder costs are interchangeable in dynamic newsvendor models. We establish monotone mappings between the set of optimal policies with backorder costs and the set of optimal policies with fill rate constraints. This clarifies the extent to which a parametric analysis of optima in one case can be performed via an algorithm directed at the other case. In a sense that is made precise, it is unnecessary to study both cases of a model; either case alone is sufficient.

 

Keywords: inventory policies; fill rate constraints; backorder costs; dynamic programming; discrete demand; continuous demand; inventory modelling; dynamic newsvendor models.

 

DOI: 10.1504/IJMOR.2012.048905

10.1504/12.48905

 

 

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