Interchanging fill rate constraints and backorder costs in inventory models
by Jiang Zhang; Matthew J. Sobel
International Journal of Mathematics in Operational Research (IJMOR), Vol. 4, No. 4, 2012

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.

Online publication date: Tue, 23-Dec-2014

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