| Volume 4, Number 2, 2014, Pages 197-220 DOI：10.11948/2014009 |
| Optimal control of a finite-capacity inventory system with setup cost and lost sales |
| Baimei Yang,Yiqian Huang,Yifan Xu |
| Keywords:Inventory System, Finite Capacity, Poisson Demand, Markov Decision Process, Lost Sales. |
| Abstract: |
| One of the most fundamental results in inventory theoryis the optimality of (s, S) policy for inventory systems withsetup cost. This result is established based on a key assumptionof infinite production/ordering capacity. Several studies haveshown that, when there is a finite production/ordering capacity,the optimal policy for the inventory system is very complicatedand indeed, only partial characterization for the optimal policyis possible. In this paper, we consider a continuous reviewinventory system with finite production/ordering capacity andsetup cost, and show that the optimal control policy for thissystem has a very simple structure. We also develop efficientalgorithms to compute the optimal control parameters. |
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