Old and New Methods for Lost-Sales Inventory Systems
Operations Research · 2008 · Volume 56 · Issue 5
Abstract
We consider the notoriously difficult discrete-time inventory model with stochastic demands, a constant lead time, and lost sales. We show that the effective state space is a relatively manageable compact set. Then, we test various plausible heuristics. We find that several perform reasonably well, although none is perfect. However, the standard base-stock policy (a direct analogue of the optimal policy for a backlog system) performs badly. We also show that the optimal cost is increasing in the lead time.
Keywords
inventory, lost sales, dynamic programming
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