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Discounted Cost Models with Backorders

In: Markovian Demand Inventory Models

Author

Listed:
  • Dirk Beyer

    (M-Factor)

  • Feng Cheng

    (Office of Performance Analysis and Strategy)

  • Suresh P. Sethi

    (The University of Texas at Dallas)

  • Michael Taksar

    (University of Missouri)

Abstract

One of the most important developments in the inventory theory has been to show that (s, S) policies are optimal for a class of dynamic inventory models with random periodic demands and fixed ordering costs. Under an (s, S) policy, if the inventory level at the beginning of a period is less than the reorder point s, then a sufficient quantity must be ordered to achieve an inventory level S, the order-up-to level, upon replenishment. There are a number of papers in the literature devoted to proving the optimality of (s, S) policies under a variety of assumptions. However, in real-life inventory problems, some of these assumptions do not hold. It is our purpose to relax these assumptions toward realism and still demonstrate the optimality of (s, S)-type policies.

Suggested Citation

  • Dirk Beyer & Feng Cheng & Suresh P. Sethi & Michael Taksar, 2010. "Discounted Cost Models with Backorders," International Series in Operations Research & Management Science, in: Markovian Demand Inventory Models, chapter 0, pages 21-40, Springer.
    • Handle: RePEc:spr:isochp:978-0-387-71604-6_2
    DOI: 10.1007/978-0-387-71604-6_2
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