Optimal policies for inventory systems with finite capacity and partially observed Markov-modulated demand and supply processes

Kenan Arifoglu and Süleyman Özekici

European Journal of Operational Research, 2010, vol. 204, issue 3, 421-438

Abstract: We analyze a single-item periodic-review inventory system with random yield and finite capacity operating in a random environment. The primary objective is to extend the model of Gallego and Hu (2004) to the more general case when the environment is only partially observable. Although our analysis is specific to inventory systems, it can also be applied to production systems by replacing the fixed capacity supplier with a fixed capacity producer. Using sufficient statistics, we consider single-period, multiple-period and infinite-period problems to show that a state-dependent modified inflated base-stock policy is optimal. Moreover, we show that the multiple-period cost converges to the infinite-period cost as the length of the planning horizon increases.

Keywords: Random; yield; Fixed; capacity; Random; environment; Modified; inflated; base-stock; policy; Dynamic; programming; Sufficient; statistics; POMDP (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0377-2217(09)00797-8
Full text for ScienceDirect subscribers only

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:eee:ejores:v:204:y:2010:i:3:p:421-438

Access Statistics for this article

European Journal of Operational Research is currently edited by Roman Slowinski, Jesus Artalejo, Jean-Charles. Billaut, Robert Dyson and Lorenzo Peccati

More articles in European Journal of Operational Research from Elsevier
Bibliographic data for series maintained by Catherine Liu ().