 Optimality of (s, S) Inventory Policies under Renewal Demand and General Cost StructuresSandun Perera, Ganesh Janakiraman and Shun†Chen Niu Production and Operations Management, 2018, vol. 27, issue 2, 368-383 Abstract: We study a single†stage, continuous†time inventory model where unit†sized demands arrive according to a renewal process and show that an (s, S) policy is optimal under minimal assumptions on the ordering/procurement and holding/backorder cost functions. To our knowledge, the derivation of almost all existing (s, S)†optimality results for stochastic inventory models assume that the ordering cost is composed of a fixed setup cost and a proportional variable cost; in contrast, our formulation allows virtually any reasonable ordering†cost structure. Thus, our paper demonstrates that (s, S)†optimality actually holds in an important, primitive stochastic setting for all other practically interesting ordering cost structures such as well†known quantity discount schemes (e.g., all†units, incremental and truckload), multiple setup costs, supplier†imposed size constraints (e.g., batch†ordering and minimum†order†quantity), arbitrary increasing and concave cost, as well as any variants of these. It is noteworthy that our proof only relies on elementary arguments. Date: 2018 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:popmgt:v:27:y:2018:i:2:p:368-383 Ordering information: This journal article can be ordered from Access Statistics for this article Production and Operations Management is currently edited by Kalyan Singhal More articles in Production and Operations Management from Production and Operations Management Society |
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