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Near-Optimal Modified Base Stock Policies For The Capacitated Inventory Problem With Stochastic Demand And Fixed Cost

Author

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  • OKAN ÖRSAN ÖZENER

    (Ozyegin University, Istanbul, Turkey)

  • REFIK GÜLLÜ

    (Bogazici University, Istanbul, Turkey)

  • NESIM ERKIP

    (Bilkent University, Ankara, Turkey)

Abstract

In this study, we investigate a single-item, periodic-review inventory problem where the production capacity is limited and unmet demand is backordered. We assume that customer demand in each period is a stationary, discrete random variable. Linear holding and backorder cost are charged per unit at the end of a period. In addition to the variable cost charged per unit ordered, a positive fixed ordering cost is incurred with each order given. The optimization criterion is the minimization of the expected cost per period over a planning horizon. We investigate the infinite horizon problem by modeling the problem as a discrete-time Markov chain. We propose a heuristic for the problem based on a particular solution of this stationary model, and conduct a computational study on a set of instances, providing insight on the performance of the heuristic.

Suggested Citation

  • Okan Örsan Özener & Refik Güllü & Nesim Erkip, 2014. "Near-Optimal Modified Base Stock Policies For The Capacitated Inventory Problem With Stochastic Demand And Fixed Cost," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 31(03), pages 1-27.
    • Handle: RePEc:wsi:apjorx:v:31:y:2014:i:03:n:s0217595914500195
    DOI: 10.1142/S0217595914500195
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    References listed on IDEAS

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    1. repec:dgr:rugsom:10005 is not listed on IDEAS
    2. Foreest, N. D. van & Wijngaard, J., 2010. "On the Optimal Policy for the Single-product Inventory Problem with Set-up Cost and a Restricted Production Capacity," Research Report 10005, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
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    Cited by:

    1. Chen, Zhen & Rossi, Roberto, 2021. "A dynamic ordering policy for a stochastic inventory problem with cash constraints," Omega, Elsevier, vol. 102(C).

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