Technical Note—Cost Formulas for Continuous Review Inventory Models with Fixed Delivery Lags

Awi Federgruen and Zvi Schechner
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Awi Federgruen: Columbia University, New York, New York
Zvi Schechner: Columbia University, New York, New York

Operations Research, 1983, vol. 31, issue 5, 957-965

Abstract: In continuous review models with a fixed delivery lag T , the state of the system is conveniently described by the net inventory position = (inventory on hand) plus (outstanding orders), in spite of most cost components depending on the actual inventory on hand . To relate these two inventory concepts one observes that the distribution of the inventory on hand at time t + T is determined by the inventory position at time t . This explains the standard convention of charging the expected costs incurred in [ S n + T , S n +1 + T ) to the decision made at time S n , where S n denotes the n th decision epoch. This paper derives simple expressions for the expected costs in [ S n + T , S n +1 + T ) as a function of the inventory position just after decision epoch S n .

Keywords: 118 semi-Markov processes; 362 stochastic inventory models (search for similar items in EconPapers)
Date: 1983
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Citations: View citations in EconPapers (11)

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