 Optimal inventory control with cyclic fixed order costsFlorian Taube and Stefan Minner Production and Operations Management, 2023, vol. 32, issue 10, 3286-3294 Abstract: We consider a periodic review single‐item inventory model under stochastic demand. Every m periods, in the regular order period, fixed order costs are K. In the periods in‐between, the intraperiods, higher fixed order costs of L>K$L>K$ apply. The literature on optimal inventory policies under fixed order costs does not account for these time‐dependent fixed order costs. By generalizing existing proofs for optimal inventory policies, we close this gap in inventory theory. The optimal inventory policy is complex in the regular order period and in the intraperiods, a period‐dependent (s,S)$(s,S)$ policy is optimal. We describe and prove this optimal policy based on the notion of K‐convexity and the optimal ordering behavior in the presence of non–K‐convex cost functions. In a numerical study, we find that a major driver of the optimal policy is a forward‐buying effect that shifts the probability of ordering from the intraperiods to the regular order period. The cost differences between the optimal and a pure period‐dependent (s,S)$(s,S)$ policy are, however, small. Date: 2023 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:popmgt:v:32:y:2023:i:10:p:3286-3294 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 |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.