A good approximation of the inventory level in a (Q, r) perishable inventory system

Abstract

This paper derives a good approach to approximating the expected inventory level per unit time for the continuous review (Q, r) perishable inventory system. Three existing approximation approaches are examined and compared with the proposed approach. Three stockout cases, including the full backorder, the partial backorder, and the full lost sales cases, which customers or material users generally use to respond to a stockout condition are considered. This study reveals the fact that the proposed approximation is simple yet good and suitable for incorporation into the (Q, r) perishable inventory model to determine the best ordering policy. The results from numerical examples and a sensitivity analysis indicate that severe underestimation or overestimation of the expected inventory level per unit time due to the use of an inappropriate approximation approach would result in great distortion in the determination of the best ordering policy.

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