An intuitive approach to inventory control with optimal stopping

Nicky D. Van Foreest*, Onur A. Kilic

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

1 Citation (Scopus)
104 Downloads (Pure)

Abstract

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).

Original languageEnglish
Pages (from-to)921-924
Number of pages4
JournalEuropean Journal of Operational Research
Volume311
Issue number3
DOIs
Publication statusPublished - 16-Dec-2023

Keywords

  • Dynamic programming
  • Inventory
  • Optimal stopping

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