OPTIMAL INVENTORY STOCKING LEVELS WITH DEMAND TRANSFERENCE AMONG PRODUCTS

When a product is temporarily unavailable it is not uncommon to find consumers buying a related product rather than postponing the purchase until the former is back in stock. This phenomenon may be observed in the sale of cigarettes, candy bars, different-sized packages of milk, lawn fertilizer, brands of wine and a host of other consumer items. This paper suggests a model for the vendor to employ when seeking to opti mize his stocking strategy for a periodic review/replenishment system.