A partial backordering approach to inventory control

We study the effects of using a partial backordering approach to controlling inventories under deterministic and stochastic demands, respectively. With a deterministic demand, our model is built with the objective of minimizing the total cost of ordering, holding, backordering and lost sales. The conditions for the partial backordering policy to be feasible are identified and a pair-wise comparison among the no-backordering, complete backordering, and partial backordering doctrines is conducted. In the stochastic case, we focus on a make-to-stock system with a Poisson demand and exponential production time, which allows us to establish a queuing model to examine the cost-effectiveness of using partial backorders. The conditions under which the partial backordering policy outperforms the complete backordering policy are identified.