Critical Number Policies for Inventory Models with Periodic Data

1 January 1989

journal article
Published by Institute for Operations Research and the Management Sciences (INFORMS) in Management Science

Vol. 35 (1) , 71-80
https://doi.org/10.1287/mnsc.35.1.71

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.inventory, stochastic models, optimal policies

Keywords

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