Modified critical fractile approach for a class of partial postponement problems

We obtain an insightful interpretation of the optimality conditions for this class of problems, and use it to obtain rules of thumb that practitioners can incorporate into their inventory models to determine the stocking levels to minimize the supply chain cost. Instead of proposing a numerical procedure to obtain the optimal solution, we propose an adaptation of the classical critical fractile approach for this class of partial postponement problem. The closed-form formula obtained are surprisingly effective. Our numerical results suggest that this simple approach to inventory planning often comes close to the performance of the optimal solution obtained from numerical method.