Optimality of (s, S) Policies in Inventory Models with Markovian Demand
Operations Research, Vol. 45, No. 6, pp. 931-939, 1997
9 Pages Posted: 29 Apr 2008 Last revised: 26 Apr 2014
Date Written: December 1995
Abstract
This paper is concerned with a generalization of classical inventory models (with fixed ordering costs) that exhibit (s, S) policies. In our model, the distribution of demands in successive periods is dependent on a Markov chain. The model includes the case of cyclic or seasonal demand. The model is further extended to incorporate some other realistic features such as no ordering periods and storage and service level constraints. Both finite and infinite horizon nonstationary problems are considered. We show that (s, S) policies are also optimal for the generalized model as well as its extensions.
Keywords: dynamic inventory model, Markov chain, (s, S) policy, optimization, dynamic programming, Markovian demand, Markov modulated demand, production scheduling, overhead costs
JEL Classification: M11, C61, M20
Suggested Citation: Suggested Citation
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