On the stochastic inventory problem under order capacity constraints

Roberto Rossi, Zhen Chen and S. Armagan Tarim

European Journal of Operational Research, 2024, vol. 312, issue 2, 541-555

Abstract: We consider the single-item single-stocking location stochastic inventory system under a fixed ordering cost component. A long-standing problem is that of determining the structure of the optimal control policy when this system is subject to order quantity capacity constraints; to date, only partial characterisations of the optimal policy have been discussed. An open question is whether a policy with a single continuous interval over which ordering is prescribed is optimal for this problem. Under the so-called “continuous order property” conjecture, we show that the optimal policy takes the modified multi-(s,S) form. Moreover, we provide a numerical counterexample in which the continuous order property is violated, and hence show that a modified multi-(s,S) policy is not optimal in general. However, in an extensive computational study, we show that instances violating the continuous order property do not surface, and that the plans generated by a modified multi-(s,S) policy can therefore be considered, from a practical standpoint, near-optimal. Finally, we show that a modified (s,S) policy also performs well in this empirical setting.

Keywords: Inventory; Stochastic lot sizing; Order capacity; Modified multi-(s,S) policy (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0377221723005386
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:312:y:2024:i:2:p:541-555

DOI: 10.1016/j.ejor.2023.06.045

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 ().