The Optimality of (s,S) Policies for a Stochastic Inventory Problem with Proportional and Lump-Sum Penalty Cost
Management Science · 1987 · Volume 33 · Issue 6
Abstract
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 ).
Keywords
inventory/production: stochastic models, inventory/production: planning horizons
Enable JavaScript for citation tools and additional paper interactions.