Simple Approximations for a Variety of Dynamic Leadtime Lost-Sales Inventory Models

This paper treats three realistic versions of the classical leadtime lost-sales inventory problem: inclusion of a set-up for ordering, partial backordering, and the random leadtime lost-sales inventory problem, as well as all possible combinations of these three models. The goal of the study is to construct simple myopic approximations for these various models. We report extensive computations that compare the approximations derived with the optimal policies for leadtimes of one and two periods. In addition, we develop a simulator that determines the best S or (s, S) policies by a Fibonacci search of the appropriate response surface and compares the performance of the approximations to these policies for maximum leadtimes of five, ten, and twenty periods for a variety of configurations of the cost structure, demand distribution, and leadtime distribution.