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LIFO Inventory Systems


  • Morris A. Cohen

    (University of Pennsylvania)

  • Dov Pekelman

    (Tel Aviv University)


In many perishable product inventory systems where the issuing of stock to meet demand is controlled by the consumer, the movement of units through the system obeys a LIFO discipline. In this paper the evolution over time of the LIFO inventory stock age distribution in an environment of stochastic demand is analyzed. The inventory related processes are shown to be completely specified by the random walk ladder height process. This characterization of the LIFO system is then utilized to derive limiting distributions for the stock age distribution when a constant amount is ordered each period. The distribution is found from a Wiener-Hopf integral equation for the ladder height random variable. Transient results for the case of a fixed critical number order policy are also presented. Explicit closed form results are derived for an example in which demand is exponentially distributed. The paper concludes by demonstrating how the results on the steady-state age distribution can be used for devising upper and lower bounds on expected shortages and outdates.

Suggested Citation

  • Morris A. Cohen & Dov Pekelman, 1978. "LIFO Inventory Systems," Management Science, INFORMS, vol. 24(11), pages 1150-1162, July.
  • Handle: RePEc:inm:ormnsc:v:24:y:1978:i:11:p:1150-1162

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    References listed on IDEAS

    1. Jacob A. Mincer & Victor Zarnowitz, 1969. "The Evaluation of Economic Forecasts," NBER Chapters,in: Economic Forecasts and Expectations: Analysis of Forecasting Behavior and Performance, pages 3-46 National Bureau of Economic Research, Inc.
    2. N/A, 1962. "Summary," National Institute Economic Review, National Institute of Economic and Social Research, vol. 19(1), pages 3-3, February.
    3. N/A, 1962. "Summary," National Institute Economic Review, National Institute of Economic and Social Research, vol. 20(1), pages 3-3, May.
    4. N/A, 1962. "Summary," National Institute Economic Review, National Institute of Economic and Social Research, vol. 21(1), pages 3-3, August.
    5. J. G. Cragg & Burton G. Malkiel, 1968. "The Consensus And Accuracy Of Some Predictions Of The Growth Of Corporate Earnings," Journal of Finance, American Finance Association, vol. 23(1), pages 67-84, March.
    6. N/A, 1962. "Summary," National Institute Economic Review, National Institute of Economic and Social Research, vol. 22(1), pages 3-3, November.
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    Cited by:

    1. Carolyn E. Phelan & Daniele Marazzina & Gianluca Fusai & Guido Germano, 2017. "Fluctuation identities with continuous monitoring and their application to price barrier options," Papers 1712.00077,
    2. Minner, Stefan & Transchel, Sandra, 2017. "Order variability in perishable product supply chains," European Journal of Operational Research, Elsevier, vol. 260(1), pages 93-107.

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