Abstract
We consider a finite-horizon periodic-review inventory system with fixed replenishment costs that faces non-stationary demands. The structure of the optimal control policy for this system has long been known. However, finding optimal policy parameters requires solving a large-scale stochastic dynamic program. To circumvent this, we devise a recursion-free approximation for the cost function of the problem. This translates into an efficient and effective heuristic to compute policy parameters that significantly outperforms earlier heuristics. Our approach is easy-to-understand and easy-to-use as it follows by elementary methods of shortest paths and convex minimization.
Original language | English |
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Pages (from-to) | 899-905 |
Number of pages | 7 |
Journal | European Journal of Operational Research |
Volume | 316 |
Issue number | 3 |
Early online date | 13-Feb-2024 |
DOIs | |
Publication status | Published - 1-Aug-2024 |
Keywords
- Approximation
- Heuristic
- Inventory
- Non-stationary demand
- Stochastic