Journal
OMEGA-INTERNATIONAL JOURNAL OF MANAGEMENT SCIENCE
Volume 41, Issue 6, Pages 1020-1028Publisher
PERGAMON-ELSEVIER SCIENCE LTD
DOI: 10.1016/j.omega.2013.01.003
Keywords
Stochastic inventory; Newsboy problem; Backorder rate function; Maximum expected profit
Funding
- Spanish Ministry of Science and Innovation [MTM2010-18591]
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In this paper, a generalization is presented of the newsboy problem where an emergency lot can be ordered to provide for a certain fraction of shortage. This fraction is described by a general backorder rate function which is non-increasing with respect to the unsatisfied demand. An exponential distribution for the demand during the selling season is assumed. An expression is obtained in a closed form for the optimal lot size and the maximum expected profit. A general sensitivity analysis of the optimal policy with respect to the backorder rate function and the parameters of the inventory system is developed. When the backorder rate function is described by some particular functions, its behavior is analyzed with respect to changes in the parameters. To illustrate the theoretical results, some numerical examples are also given. (C) 2013 Elsevier Ltd. All rights reserved.
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