Using the Deterministic EOQ Formula in Stochastic Inventory Control

1 June 1996

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

Vol. 42 (6) , 830-834
https://doi.org/10.1287/mnsc.42.6.830

Abstract

This note gives an improved bound (\root 5 - 2)/2 \approx 0.1180 for the relative cost increase when using the deterministic EOQ formula as a heuristic solution when demands are stochastic. We also discuss under what circumstances this bound is tight.inventory/production, lot sizing, error bound

Keywords

EOQ FORMULA
DETERMINISTIC EOQ
STOCHASTIC
TIGHT
CIRCUMSTANCES
NOTE
HEURISTIC

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