Inventory policies for all-or-nothing demand processes

When there is insufficient stock to meet a specific customer order, a commo n assumption is that the remaining stock will be used to satisfy the order partially while the balance of the order is backordered or lost - this is t he 'partial backorder' or 'partial lost sales' assumption. In this paper we consider what happens when the nature of the demand process is such that o rders must be met in full or not at all - this is the 'all-or-nothing' dema nd assumption. We concentrate, for the purpose of illustration, on the cont ext of a continuous review model, with a Poisson customer arrival rate, wit h a fixed lead time and for which not more than one replenishment order may be outstanding at any time. (C) 2001 Elsevier Science B.V. All rights rese rved.