The discounted (R,Q) inventory model—The Shrewd Accountant's Heuristic

Mojtaba Farvid and Kaj Rosling

International Journal of Production Economics, 2014, vol. 149, issue C, 17-27

Abstract: The discounted continuous-review (R,Q) inventory model with continuous and stochastic demand is investigated. New optimality conditions are derived, clarifying the difference to the average-cost case, also graphically. Supported by depreciation theory, applied to the value of a setup, the results suggest an insightful and very precise approximation – The Shrewd Accountant's Heuristic – based on a new average-cost model. It deepens and extends the work of Hadley (1964). Three examples are worked out in detail and the model is generalized to Poisson demand and to stochastic lead-times.

Keywords: Discounting; Average cost; (R,Q) inventory policies; Depreciations; Interest rates (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:149:y:2014:i:c:p:17-27

DOI: 10.1016/j.ijpe.2013.02.010

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