The Performance Evaluation of Inventory Policies in Vending Machine Systems under Uncertainty

Abstract

This paper suggests three inventory policies for vending machine systems with uncertain customer demands. Those are the no stock-out allowance policy, stock-out policy allowing only first-tier giveups, and stock-out allowance policy. Computational experiments are performed on test problems to evaluate the performance of the three inventory policies with respect to system profit and risk using a computer simulation. For the computational study, mathematical models are constructed for the three inventory policies to determine the item allocation to storage compartments and the replenishment interval of a vending machine. The results showed the substantial advantage of the stock-out allowance policy over the other two policies in economic terms and risk management.