Abstract
This study considers a (Q, R) continuous review inventory model with a partial backorder rate, and analyzes the effects of backorder rate as a control variable on the inventory system. Through running the optimal backorder policy, we can have the relevant inventory cost minimized to increase the competitive edge in business. We discuss two models that are complete and partial information about the lead time demand distribution, that is, we first assume that the lead time demand follows a normal distribution, and then remove this assumption and only assume that the first and second moments of the probability distribution of lead time demand are known. For each case, we develop a procedure to find the optimal ordering policy.
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