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Critical Number Policies for Inventory Models with Periodic Data

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  • Paul Zipkin

    (Columbia University, Graduate School of Business, New York, New York 10027)

Abstract

We consider an infinite-horizon in problem with stochastic demands where the data vary periodically. Karlin (Karlin, S. 1960a. Dynamic inventory policy with varying stochastic demands. Management Sci. 6 231--258; Karlin, S. 1960b. Optimal policy for dynamic inventory process with stochastic demands subject to seasonal variations. J. SIAM 8 611--629.) shows that a periodic critical-number policy is optimal and presents an algorithm for computing the critical numbers, assuming discounted costs. Here we develop an alternative, conceptually simpler approach to these problems. The results include a proof of the optimality of such policies for the average-cost case, and a qualitative description of the behavior of the optimal policy as "smoothing" fluctuations in the data.

Suggested Citation

  • Paul Zipkin, 1989. "Critical Number Policies for Inventory Models with Periodic Data," Management Science, INFORMS, vol. 35(1), pages 71-80, January.
    • Handle: RePEc:inm:ormnsc:v:35:y:1989:i:1:p:71-80
    DOI: 10.1287/mnsc.35.1.71
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