Lead Time and Ordering Cost Reductions in Continuous Review Inventory Systems with Partial Backorders

Abstract

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.. Palgrave Macmillan Journals and Operational Research Society are collaborating with JSTOR to digitize, preserve and extend access to The Journal of the Operational Research Society. This paper investigates the impact of ordering cost reduction on the modified continuous review inventory systems involving variable lead time with a mixture of backorders and lost sales. The objective is to simultaneously optimise the order quantity, ordering cost, reorder point and lead time. We first assume the lead time demand follows a normal distribution, then relax this assumption to consider the distribution free case where only the mean and variance of lead time demands are known. An algorithm procedure of finding the optimal solution is developed, and two numerical examples are given to illustrate the results.

An alternative model for integrated vendor–buyer inventory under controllable lead time and its heuristic solution

“…Allowing partial backorders, Ouyang et al (1999) studied lead time and ordering cost reductions in continuous review systems. Considering stochastic demand, Ouyang and Chuang (2000) presented a periodic review inventory model with a service level constraint to find the optimal review period and lead time. Pan and Hsiao (2001) proposed two inventory models under probabilistic demand-one with negotiable backorders discounts and the other with variable lead time.…”

Integrated vendor--buyer inventory system with sublot sampling inspection policy and controllable lead time

“…ffiffiffi ffi L p Þ 2 Q 4 ð1 À M Þ 2 2ðkÞ ðkÞ À ½ÈðkÞ À 1 2 È É > 0, because (k ) > 0, (k ) > 0 and 2(k ) (k ) À [F(k ) À 1] 2 > 0, for all k > 0 (the proof see Ouyang et al 1999a). Therefore, for fixed m and L 2 [L i , L iÀ1 ], JETC N (Q, k, L, m) is a convex function in (Q, k ).…”

“…Example 1: Consider an inventory system with normally distributed demand during the lead time and the following parameter values: D ¼ 1000 units/year, P ¼ 3200 units/year, A b ¼ $25/order, A v ¼ $400/set-up, h b ¼ $5/unit/year, h v ¼ $4/unit/year, ¼ 7units/week, and the lead time has three components with data shown in table 1 (Banerjee 1986, Goyal 1988, Ouyang et al 1999a, Pan and Yang 2002. It is assumed 1 year ¼ 52 weeks and 1 week ¼ 7 days here.…”

Trade credit financing in the vendor–buyer inventory system with ordering cost reduction, transportation cost and backorder price discount when the received quantity is uncertain

“…Porteus [13] first developed a framework of setup cost reduction on the classical Economic Order Quantity (EOQ) model where he introduced the investment cost function for controlling setup cost. Then, Ouyang et al [14] investigated the influence of ordering cost reduction on modified continuous review inventory systems involving variable lead time with partial backorders. Annadurai and Uthayakumar [15] addressed ordering cost reduction in probabilistic inventory model with controllable lead time and a service level.…”