Authors: Yang Tan; Michael X. Weng
Addresses: Pricing Science and Engineering Department, FedEx Express World Headquarters, 3640 Hacks Cross Road, Memphis, TN 38125, USA. ' Department of Industrial and Management Systems Engineering, University of South Florida, 4202 E. Fowler Avenue, Tampa, FL 33620, USA
Abstract: A finite horizon deteriorating inventory model is studied. The system is under periodic review and there is a positive fixed order cost associated with any placed order. Customer demand is stochastic and a constant fraction of any positive leftover stock is deteriorated at the end of each period. Any unsatisfied demand is partially backlogged and fulfilled immediately as a new order arrives. This research is distinguished from most literature by considering the effects of deterioration and partial backlogging under stochastic customer demand. The optimal conditions under which a (s, S) policy holds are successfully derived and the explicit order quantities are obtained by reformulating the problem as a stochastic programming model.
Keywords: deteriorating items; periodic review; stochastic demand; partial backlogging; progressive hedging; lot sizing models; inventory modelling.
International Journal of Services Operations and Informatics, 2012 Vol.7 No.1, pp.18 - 36
Received: 16 Sep 2011
Accepted: 03 Apr 2012
Published online: 30 Aug 2012 *