TY - JOUR
T1 - Stochastic Periodic-Review Models with Duration- and Quantity-Dependent Inventory Costs
T2 - Properties and Approximations
AU - Avinadav, Tal
N1 - Publisher Copyright:
© 2016 World Scientific Publishing Co.
PY - 2016/8/1
Y1 - 2016/8/1
N2 - 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.
AB - 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.
KW - Inventory
KW - approximation
KW - continuous accounting scheme
KW - stochastic-periodic review
UR - http://www.scopus.com/inward/record.url?scp=84979306789&partnerID=8YFLogxK
U2 - 10.1142/s0217595916500305
DO - 10.1142/s0217595916500305
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SN - 0217-5959
VL - 33
JO - Asia-Pacific Journal of Operational Research
JF - Asia-Pacific Journal of Operational Research
IS - 4
M1 - 1650030
ER -