DETERMINATION OF THE OPTIMAL BACKORDER LEVEL FOR A LOT-SIZE REORDER POINT INVENTORY SYSTEM WITH BACKORDER PARAMETER
Keywords:
Backordered Level, Backorder Effect, Cycle Stock, Stock-Out and Backordered Demand.Abstract
This paper attempts to investigate the existence of an optimal backorder level that will minimize the expected total inventory cost of a regular (R, Q) lot-size reorder point system that is associated with backorder effect and establish the allowable backorder levels. To achieve this, the expected order cycle cost function of the lot-size reorder point system with backorder effect is optimized to determine the optimal backorder parameter. Numerical results presented showed that an optimal backorder level of 8 units exist where the expected order cycle cost is minimum with a value N19,036,000. Furthermore between the backorder level of 0 and 8 units, the order cycle cost decreases from N19,105,000 to N19,036,000. Thereby defining the range of the allowable backorder levels.
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