A periodic review inventory system under stochastic demand with controllable safety stock, lead time, and price discount under partially backlogged shortages Online publication date: Mon, 09-Nov-2020
by Nughthoh Arfawi Kurdhi; Rumi Iqbal Doewes; Yuliana
International Journal of Value Chain Management (IJVCM), Vol. 11, No. 4, 2020
Abstract: The stochastic inventory system analysed in this paper explores the problem of the backorder price discount, safety stock, lead time, and review period as control variables to widen applications for a periodic review inventory model. In many practical situations, the variable lead time can be divided into some components which have a crashing cost for the reduced lead time. Moreover, the firm may offer a price discount to the obliged and loyal customers to pay off the uncomfortableness of backordering. Furthermore, the protection interval demand (i.e., review period plus lead time) is assumed to follows a normal distribution. The aim is to develop an algorithm to determine the optimal solutions, so that the total expected annual cost reaches at a minimum value. A numerical example is given to illustrate the application of the system.
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