The Optimal Order Size and the Maximum Shortage Level Decision under an Order Driven Model

DOI

10.2991/emim-15.2015.188How to use a DOI?

Keywords

Order driven model; Order size decision; Maximum shortage level decision; Inventory management

Abstract

This paper mainly studies the retailer how to decision his order size and the maximum shortage level to maximize his profits. To end this, we establish an order driven model which consists of a vender and a buyer. In this model, we consider the three reality factors simultaneously: inspection errors, imperfect quality, multiple screening and shortage backordering. Based on it, we derive the optimal order size and the maximum shortage level. We also obtain three useful managerial insights. First, when the backordering cost increases, the buyer should decrease the order size and the shortage level simultaneously. Second, when freight transportation cost increases, the buyer should also increase the order size and the shortage level simultaneously. Third, the cost of accepting a defective item and the cost of rejecting a non-defective item have no impact on order size and the shortage level. Finally, we conduct numerical studies to complement our analytic findings and gain more managerial insights.

Copyright

© 2015, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Peng Zhang
AU  - Jie Xu
PY  - 2015/04
DA  - 2015/04
TI  - The Optimal Order Size and the Maximum Shortage Level Decision under an Order Driven Model
BT  - Proceedings of the 2015 International Conference on Education, Management, Information and Medicine
PB  - Atlantis Press
SP  - 967
EP  - 971
SN  - 2352-5428
UR  - https://doi.org/10.2991/emim-15.2015.188
DO  - 10.2991/emim-15.2015.188
ID  - Zhang2015/04
ER  -