Abstract
We study the inventory control problem of a retailer working under stochastic demand and stochastic limited supply. The unfulfilled part of the retailer’s order is backordered at the supplier and that the retailer has a right to cancel the replenishment of the backordered supply, if desired. We show the optimality of the a base-stock type type policy and derive the threshold inventory position over which it is optimal to cancel the replenishment of the backordered supply. We carry out a numerical analysis to quantify the benefits of supply backordering and the value of the cancelation option.
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© 2014 Springer International Publishing Switzerland
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Jakšič, M. (2014). Inventory Control with Supply Backordering. In: Huisman, D., Louwerse, I., Wagelmans, A. (eds) Operations Research Proceedings 2013. Operations Research Proceedings. Springer, Cham. https://doi.org/10.1007/978-3-319-07001-8_29
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DOI: https://doi.org/10.1007/978-3-319-07001-8_29
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