TY - JOUR
T1 - An intuitive approach to inventory control with optimal stopping
AU - Van Foreest, Nicky D.
AU - Kilic, Onur A.
N1 - Publisher Copyright:
© 2023 The Authors
PY - 2023/12/16
Y1 - 2023/12/16
N2 - In this research note, we show that a simple application of Breiman's work on optimal stopping in 1964 leads to an elementary proof that (s,S) policies minimize the long-run average cost for periodic-review inventory control problems. The method of proof is appealing as it only depends on the fundamental concepts of renewal-reward processes, optimal stopping, dynamic programming, and root-finding. Moreover, it leads to an efficient algorithm to compute the optimal policy parameters. If Breiman's paper would have received the attention it deserved, computational methods dealing with (s,S)-policies would have been found about three decades earlier than the famous algorithm of Zheng and Federgruen (1991).
AB - In this research note, we show that a simple application of Breiman's work on optimal stopping in 1964 leads to an elementary proof that (s,S) policies minimize the long-run average cost for periodic-review inventory control problems. The method of proof is appealing as it only depends on the fundamental concepts of renewal-reward processes, optimal stopping, dynamic programming, and root-finding. Moreover, it leads to an efficient algorithm to compute the optimal policy parameters. If Breiman's paper would have received the attention it deserved, computational methods dealing with (s,S)-policies would have been found about three decades earlier than the famous algorithm of Zheng and Federgruen (1991).
KW - Dynamic programming
KW - Inventory
KW - Optimal stopping
UR - http://www.scopus.com/inward/record.url?scp=85162080501&partnerID=8YFLogxK
U2 - 10.1016/j.ejor.2023.05.035
DO - 10.1016/j.ejor.2023.05.035
M3 - Article
AN - SCOPUS:85162080501
SN - 0377-2217
VL - 311
SP - 921
EP - 924
JO - European Journal of Operational Research
JF - European Journal of Operational Research
IS - 3
ER -