On the Optimal Policy Structure in Serial Inventory Systems with Lost Sales

Woonghee Tim Huh () and Ganesh Janakiraman ()
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Woonghee Tim Huh: Industrial Engineering and Operations Research Department, Columbia University, New York, New York 10027
Ganesh Janakiraman: Stern School of Business, New York University, New York, New York 10012

Operations Research, 2010, vol. 58, issue 2, 486-491

Abstract: We study a periodically reviewed, serial inventory system in which excess demand from external customers is lost. We derive elementary properties of the vector of optimal order quantities in this system. In particular, we derive bounds on the sensitivity (or, more mathematically, the derivative) of the optimal order quantity at each stage to the vector of the current inventory levels. Our analysis uses the concept of L -natural-convexity, which was studied in discrete convex analysis and recently used in the study of single-stage inventory systems with lost sales. We also remark on how our analysis extends to models with capacity constraints and/or backordering.

Keywords: inventory/production; lost sales; optimal policies; multiechelon (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (25)

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