Discounted Cost Models with Backorders

Dirk Beyer (), Feng Cheng (), Suresh Sethi and Michael Taksar ()
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Dirk Beyer: M-Factor
Feng Cheng: Office of Performance Analysis and Strategy
Michael Taksar: University of Missouri

Chapter Chapter 2 in Markovian Demand Inventory Models, 2010, pp 21-40 from Springer

Abstract: Abstract One of the most important developments in the inventory theory has been to show that (s, S) policies are optimal for a class of dynamic inventory models with random periodic demands and fixed ordering costs. Under an (s, S) policy, if the inventory level at the beginning of a period is less than the reorder point s, then a sufficient quantity must be ordered to achieve an inventory level S, the order-up-to level, upon replenishment. There are a number of papers in the literature devoted to proving the optimality of (s, S) policies under a variety of assumptions. However, in real-life inventory problems, some of these assumptions do not hold. It is our purpose to relax these assumptions toward realism and still demonstrate the optimality of (s, S)-type policies.

Keywords: Optimal Policy; Inventory Model; Inventory Level; Demand State; Type Policy (search for similar items in EconPapers)
Date: 2010
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DOI: 10.1007/978-0-387-71604-6_2

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