The relationship between decision variables and penalty cost parameter in (Q, R) inventory models

Alan J. Kaplan

Naval Research Logistics Quarterly, 1970, vol. 17, issue 2, 253-258

Abstract: This paper is concerned with the optimum decision variables found using order quantity, reorder point (Q, R) inventory models. It examines whether the optimum variables (Q* and R*) are necessarily monotonic functions of the backorder cost parameter (or equivalently of the performance objective). For a general class of models it is proved that R* must increase as the performance objective is raised, and an inequality condition is derived which governs how Q* will change. Probability distributions of lead time demand are cited or found for which Q* increases, Q* decreases, and Q* is independent of increases in performance objectives or backorder cost parameter.

Date: 1970
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https://doi.org/10.1002/nav.3800170212

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Persistent link: https://EconPapers.repec.org/RePEc:wly:navlog:v:17:y:1970:i:2:p:253-258

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