Inventory control of defective products when the demand is partially captive

Abstract

In this paper a mathematical model is developed for an inventory system in which the number of units of acceptable quality in a replenishment lot is uncertain and the demand is partially captive. It is assumed that the fraction of the demand during the stockout period which can be backordered is a random variable whose probability distribution is known. The optimal replenishment policy is synthesized for such a system. A numerical example is used to illustrate the theory. The results indicate that the optimal replenishment policy is sensitive to the nature of the demand during the stockout period.