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Optimal policy for an inventory system with backlogging and all-units discounts: Application to the composite lot size model

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  • San-José, Luis A.
  • García-Laguna, Juan

Abstract

This paper examines an inventory model with full backlogging and all-units quantity discounts. The practical scenario of a salesperson offering compensation to a client so as not to lose the sale is considered. The cost of a backorder thus includes both a fixed cost and a further cost which is proportional to the length of time the said backorder exists. A first algorithm is developed to determine the optimal policy while some extensions to this algorithm are obtained that include additional conditions on the model. In particular, the well known composite lot size model, developed by Tersine, is solved, incorporating a new stockout cost and a new all-units discount. Numerical examples are provided to illustrate the application of the algorithms.

Suggested Citation

  • San-José, Luis A. & García-Laguna, Juan, 2009. "Optimal policy for an inventory system with backlogging and all-units discounts: Application to the composite lot size model," European Journal of Operational Research, Elsevier, vol. 192(3), pages 808-823, February.
    • Handle: RePEc:eee:ejores:v:192:y:2009:i:3:p:808-823
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    References listed on IDEAS

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    Cited by:

    1. Taleizadeh, Ata Allah & Pentico, David W., 2014. "An Economic Order Quantity model with partial backordering and all-units discount," International Journal of Production Economics, Elsevier, vol. 155(C), pages 172-184.

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