Please use this identifier to cite or link to this item:
https://doi.org/10.1287/moor.2016.0833
Title: | Optimal Ordering Policy for Inventory Systems with Quantity-Dependent Setup Costs | Authors: | He, Shuangchi Yao, Dacheng Zhang, Hanqin |
Keywords: | stochastic inventory model quantity-dependent setup cost (s, S) policy base stock policy impulse control instantaneous control |
Issue Date: | 1-Nov-2017 | Publisher: | INFORMS | Citation: | He, Shuangchi, Yao, Dacheng, Zhang, Hanqin (2017-11-01). Optimal Ordering Policy for Inventory Systems with Quantity-Dependent Setup Costs. MATHEMATICS OF OPERATIONS RESEARCH 42 (4) : 979-1006. ScholarBank@NUS Repository. https://doi.org/10.1287/moor.2016.0833 | Abstract: | We consider a continuous-review inventory system in which the setup cost of each order is a general function of the order quantity and the demand process is modeled as a Brownian motion with a positive drift. Assuming the holding and shortage cost to be a convex function of the inventory level, we obtain the optimal ordering policy that minimizes the long-run average cost by a lower bound approach. To tackle some technical issues in the lower bound approach under the quantity-dependent setup cost assumption, we establish a comparison theorem that enables one to prove the global optimality of a policy by examining a tractable subset of admissible policies. Since the smooth pasting technique does not apply to our Brownian inventory model, we also propose a selection procedure for computing optimal policy parameters when the setup cost is a step function. | Source Title: | MATHEMATICS OF OPERATIONS RESEARCH | URI: | https://scholarbank.nus.edu.sg/handle/10635/229189 | ISSN: | 0364-765X 1526-5471 |
DOI: | 10.1287/moor.2016.0833 |
Appears in Collections: | Staff Publications Elements |
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