On the Optimal Policy for the Single-product Inventory Problem with Set-up Cost and a Restricted Production Capacity

N. D. van Foreest and J. Wijngaard
Additional contact information
J. Wijngaard: Groningen University

No 10005, Research Report from University of Groningen, Research Institute SOM (Systems, Organisations and Management)

Abstract: The single-product, stationary inventory problem with set-up cost is one of the classical problems in stochastic operations research. Theories have been developed to cope with finite production capacity in periodic review systems, and it has been proved that optimal policies for these cases are not of the (modified) (s, S)-type in general, but more complex. In this paper we consider a production system such that the production rate is constrained, rather than the amount as is common in periodic review models. Thus, in our case the production rate is positive and finite when the system is on and zero when off, while a cost is incurred to switching on or off. We prove that a long-run optimal stationary policy exists for this single-item continuous review inventory problem with non-zero switching cost and finite production rate, and that this optimal policy has an (s,S)-structure. We also provide an efficient numerical procedure to compute the parameters of the optimal policy.

Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/11370/4ae0d68b-2bc0-4752-920c-c1ec8aa133ed (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden (http://hdl.handle.net/11370/4ae0d68b-2bc0-4752-920c-c1ec8aa133ed [302 Found]--> https://research.rug.nl/en/publications/4ae0d68b-2bc0-4752-920c-c1ec8aa133ed [301 Moved Permanently]--> https://research.rug.nl/en/publications/on-the-optimal-policy-for-the-single-product-inventory-problem-wi)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gro:rugsom:10005

Access Statistics for this paper

More papers in Research Report from University of Groningen, Research Institute SOM (Systems, Organisations and Management) Contact information at EDIRC.
Bibliographic data for series maintained by Hanneke Tamling ().