Optimal Continuous Review Policies for Two Product Inventory Systems with Joint Setup Costs

Abstract

Minimum average cost ordering policies for continuously reviewed two product inventory systems with joint setup costs are sought. Disappointly, the optimal policy, even in a simple symmetric case, is not always simple: For some values of cost and demand parameters, a policy that would be difficult to implement is optimal. Markov Renewal Programming is used to find the region in parameter space where a given policy is optimal.