Using the Deterministic EOQ Formula in Stochastic Inventory Control

Sven Axsäter
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Sven Axsäter: Department of Industrial Engineering, Lund University, P.O. Box 118, S-221 00 Lund, Sweden

Management Science, 1996, vol. 42, issue 6, 830-834

Abstract: This note gives an improved bound (\root 5 - 2)/2 \approx 0.1180 for the relative cost increase when using the deterministic EOQ formula as a heuristic solution when demands are stochastic. We also discuss under what circumstances this bound is tight.

Keywords: inventory/production; lot sizing; error bound (search for similar items in EconPapers)
Date: 1996
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