The Optimality of (s, S) Policies for a Stochastic Inventory Problem with Proportional and Lump-Sum Penalty Cost

In this paper we consider a single product multi-period inventory problem for which the penalty cost consists of two parts, a lump-sum portion which is independent of the size of the shortage and a portion which is linear in the size of the shortage. We show that for all nonincreasing demand density functions, the expected total cost function is K-convex and hence, there is an optimal policy for the n-period problem that is (s, S).

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Year of publication:	1987
Authors:	Aneja, Yash ; Noori, A. Hamid
Published in:	Management Science. - Institute for Operations Research and the Management Sciences - INFORMS, ISSN 0025-1909. - Vol. 33.1987, 6, p. 750-755
Publisher:	Institute for Operations Research and the Management Sciences - INFORMS
Subject:	inventory/production: stochastic models \| inventory/production: planning horizons

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Extent:	application/pdf
Type of publication:	Article
Other identifiers:	10.1287/mnsc.33.6.750 [DOI]
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10009191623