Computationally simple and unified approach to finite- and infinite-horizon Clark–Scarf inventory model

Charu Sinha, Matthew Sobel and Volodymyr Babich

IISE Transactions, 2011, vol. 43, issue 3, 207-219

Abstract: In this article, it is shown that an easily computed and simply structured policy for making work-order decisions is optimal in the Clark–Scarf inventory model. That is a model of a make-to-stock multistage serial manufacturing process with convex costs of finished goods inventory, a setup cost for purchasing, linear costs of work-in-process inventories, and backlogging of excess demand. The criteria used in this article include the expected present value of costs (in the finite and infinite horizons) and the long-run average cost per period. Moreover, the same myopic policy that is optimal for the finite-horizon model is optimal also for the infinite-horizon model. This permits a unified approach to the various criteria.

Date: 2011
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DOI: 10.1080/0740817X.2010.523766

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