Optimal policies for inventory systems with two types of product sharing common hardware platforms: Single period and finite horizon

Mabel Chou, Chee-Khian Sim and Xue-Ming Yuan

European Journal of Operational Research, 2013, vol. 224, issue 2, 283-292

Abstract: In this paper, we consider an inventory system whose products share a common hardware platform but are differentiated by two types of software. Choice of different software results in different installation cost and different selling price of the whole product. Product with different software also faces different customer demand. We investigate the optimal proportion of an order to be installed with software 1 or 2, that maximizes expected profit in the single and multiple period scenarios, respectively. The optimal policy is analytically obtained and proved to be an order-up-to policy in each scenario. Our investigation reveals that whether to replenish, and how much to replenish each product depend not only on its own initial inventory level, and system parameters, but also the initial inventory level of the other product. We perform numerical experiments using the optimal policies we have derived in the paper.

Keywords: Inventory; Dynamic programming; Optimal policies; Software (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:224:y:2013:i:2:p:283-292

DOI: 10.1016/j.ejor.2012.07.038

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