A dynamic two-segment partial backorder control of (r,Q) inventory system

C. W. Chu, B. E. Patuwo, A. Mehrez, G. Rabinowitz

Research output: Contribution to journalArticlepeer-review

13 Scopus citations


Inventory management involves determination of shortage policy. It specifies the conditions for losing or backordering a demand. Alternative policies include pure backorder, pure lost sales, and partial backorder (using a single backorder control limit). When the backorder-cost is time dependent it makes sense to modify the backorder-limit over time. Thus, a new form of partial backorder policy (PB2) with two-segment backorder control limits is introduced. The traditional policies mentioned above, are special cases of PB2. Hence, we provide a unified framework for studying different policies that deal with shortage. The PB2 problem is formulated and solved as a discrete time, stochastic constrained control problem. Its performance is numerically compared with the simpler alternative policies. In some cases its cost savings, versus the best of PB and PL, exceeds 15%, and 7% versus a single backorder limit policy. The economical advantage is significant over a wide range of the problem parameters.

Original languageEnglish
Pages (from-to)935-953
Number of pages19
JournalComputers and Operations Research
Issue number10
StatePublished - 1 Sep 2001


  • Backorder
  • Continuous review
  • Inventory
  • Lost sales
  • Partial backorder
  • Stochastic demand

ASJC Scopus subject areas

  • General Computer Science
  • Modeling and Simulation
  • Management Science and Operations Research


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