Optimal lot size for a production–inventory system with partial backlogging and mixture of dispatching policies

In this paper we study a production–inventory model for a single product where shortages are partially backlogged. Both the backorder cost and the lost sale cost depend on a fixed cost and a cost proportional to the shortage time. We assume a mixture between the dispatching policies known as LIFO (last in, first out) and FIFO (first in, first out) in the discipline of service to fill the backlogged demand. By using a sequential optimization procedure, we determine in a closed-form the optimal production policies and the optimal profit for all the possible cases obtained from the developed model. We show how this new model generalizes several inventory models proposed in the literature. Finally, numerical results are presented to analyze the sensitivity of the optimal policies with respect to changes in some parameters of the system.