Research Reports from the Department of Operations

Authors

Muhittin Oral

Document Type

Report

Publication Date

1-1-1972

Abstract

The work in this research falls in the area of operations research known as inventory theory, concentrating on inventory cost parameters (or functions) in general and on the development of a model to evaluate shortage cost in particular. The inventory policy (Q,S,R) with constant lead time L is introduced, where Q is the constant size of orders, S the reorder level and R is the upper limit for the backlogged demand. Associated with the (Q,S,R) policy a (R+S+2)-state semi-Markov process is defined the states corresponding to no-stockout durations starting initially with various levels of physical inventory and to stockout duration within which backlogged demand is always non-negative. For the stockout duration of a given length, a model is developed to compute immediate shortage cost, a cost resulting from stockout conditions but not including the cost due to loss of goodwill, by using a queueing-theoretic approach. A formula to estimate the discounted cost due to loss of goodwill for an infinite time horizon is also derived by employing the concepts and results of semi-Markov processes.

Keywords

Operations research, Inventory control--Mathematical models, Stochastic processes, Markov processes, Queuing theory, Decision making--Mathematical models

Publication Title

Technical Memorandums from the Department of Operations, School of Management, Case Western Reserve University

Issue

Technical memorandum no. 257

Rights

This work is in the public domain and may be freely downloaded for personal or academic use

Share

COinS
 
 

To view the content in your browser, please download Adobe Reader or, alternately,
you may Download the file to your hard drive.

NOTE: The latest versions of Adobe Reader do not support viewing PDF files within Firefox on Mac OS and if you are using a modern (Intel) Mac, there is no official plugin for viewing PDF files within the browser window.