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An Improved formula for inventory decisions under service and safety stock constraints
Chandrasekhar Das
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Abstract
This paper solves the reorder point inventory model under two constraints: safety stock is nonnegative, and the fraction of backorders does not exceed a given limit. The solution procedure modifies a noniterative approach due to Simpson in order to achieve better accuracy and wider applicability of the results. A formula for the implied cost of a fixed service level is also developed.