Optimal Replenishment Strategy for Inventory Mechanism with Step-Shaped Demand

Yiju Wang (), Donglei Du () and Jingfu Huang ()
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Yiju Wang: Qufu Normal University
Donglei Du: University of New Brunswick
Jingfu Huang: Qufu Normal University

Journal of Optimization Theory and Applications, 2021, vol. 190, issue 3, No 5, 860 pages

Abstract: Abstract This paper extends the classical economic order quantity inventory model to that the planning horizon consists of two stages—a finite planning horizon and an infinite planning horizon, the demand in each stage is deterministic and stable but differs. The main goal is to find the optimal replenishment and stocking policy in each stage in order to keep the total relevant cost as low as possible, which is formulated as a mixed integer optimization problem. Using the alternating minimization method and the optimization theory, we develop a closed-form solution to the optimal inventory model and provide an optimal replenishment strategy to the retailer. Some numerical experiments are made to test the validity of the model and the effect of the involved parameters to the replenishment policy. A numerical example shows a counterintuitive fact that the economic ordering quantity may not necessarily be optimal for this inventory mechanism.

Keywords: Optimal inventory model; Step-shaped demand; Alternating minimization method; 90B05 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s10957-021-01909-9

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