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Computing Expected Values of Customer Requests Backordered

Author

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  • Alan J. Kaplan

    (AMC Inventory Research Office, Philadelphia, Pennsylvania)

Abstract

Suppose that the stockout cost for a supplier is a function of the number of customer requests backordered, each request possibly being for several units of stock of a product. The problem arises of computing the expected number of customer requests backordered. when techniques are available for computing the expected number of units backordered. A simple conversion factor is desirable. Based on a formal analysis, the conversion factor 1/E(X) is recommended where E(X) is average size of a customer request. This conclusion is contrary to that reached in previously published research. Analysis is extended to the case where backorder cost is time weighted; i.e., backordered sales are not lost, and the cost of a backorder depends on the time elapsing before the customer request is finally satisfied.

Suggested Citation

  • Alan J. Kaplan, 1971. "Computing Expected Values of Customer Requests Backordered," Management Science, INFORMS, vol. 17(9), pages 647-651, May.
    • Handle: RePEc:inm:ormnsc:v:17:y:1971:i:9:p:647-651
    DOI: 10.1287/mnsc.17.9.647
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    Cited by:

    1. Jing-Sheng Song, 2002. "Order-Based Backorders and Their Implications in Multi-Item Inventory Systems," Management Science, INFORMS, vol. 48(4), pages 499-516, April.
    2. Yingdong Lu, 2007. "Estimation of average backorders for an assemble‐to‐order system with random batch demands through extreme statistics," Naval Research Logistics (NRL), John Wiley & Sons, vol. 54(1), pages 33-45, February.

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