Stochastic Periodic-Review Models with Duration- and Quantity-Dependent Inventory Costs: Properties and Approximations

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

Abstract

In this paper, we formulate a stochastic periodic-review inventory model with lead-time that considers both duration- and quantity-dependent inventory costs, and show that the optimality equation has the same format as the standard newsvendor problem with a modified demand distribution. We suggest (i) an approximation of the optimal order-up-to level, based on discretization of the inventory cost accounting, and (ii) two heuristic formulas, based on the two-moment normal approximation of the modified demand distribution, and on an approximated deterministic model. We evaluate the performances of these formulas using a Brownian motion demand process under different scenarios, and discuss their advantages and disadvantages.

Original languageEnglish
Article number1650030
JournalAsia-Pacific Journal of Operational Research
Volume33
Issue number4
DOIs
StatePublished - 1 Aug 2016

Bibliographical note

Publisher Copyright:
© 2016 World Scientific Publishing Co.

Keywords

  • Inventory
  • approximation
  • continuous accounting scheme
  • stochastic-periodic review

Fingerprint

Dive into the research topics of 'Stochastic Periodic-Review Models with Duration- and Quantity-Dependent Inventory Costs: Properties and Approximations'. Together they form a unique fingerprint.

Cite this