TY - JOUR SN - 09255273 AU - Jakšič, Marko AU - Fransoo, Jan C. T1 - Optimal inventory management with supply backordering JF - International Journal of Production Economics SP - 254 EP - 264 VL - 159 PY - 2015 PB - Elsevier AB - We study the inventory control problem of a retailer working under stochastic demand and stochastic limited supply. We assume that the unfilled part of the retailer¿s order is fully backordered at the supplier and replenished with certainty in the following period. As it may not always be optimal for the retailer to replenish the backordered supply, we also consider the setting in which the retailer has a right to either partially or fully cancel these backorders, if desired. We show the optimality of the base-stock policy and characterize the threshold inventory position above which it is optimal to fully cancel the replenishment of the backordered supply. We carry out a numerical analysis to quantify the benefits of supply backordering and the value of the cancelation option, and reveal several managerial insights. TS - BibTeX DO - 10.1016/j.ijpe.2014.09.015 M4 - Citavi ER -