Optimizing (r, Q) Decisions Considering Misplaced Items: Lost-Sales and Backorder Cases

Abstract

Most available (r, Q) inventory models assume that the actual inventory records are the same as these in the computer systems. With this unrealistic assumption, these models may, thus, distort the inventory decision making in practice. In this study, we develop new (r, Q) models considering the misplaced items to provide inventory managers with realistic decision-making support. In developing the new models, we characterize two cases: backorders and lost-sales. In both cases, we consider stochastic demand and introduce parameters to represent misplaced items. We also propose solution algorithms for model solving. Numerical examples are conducted to demonstrate the applicability and potential of the new (r, Q) models and solution algorithms in making realistic inventory decisions. We further obtain managerial implications. © 2018 IEEE.