Abstract

This paper considers a single-item, periodic-review inventory model with uncertain demands. In contrast to prior treatments of this problem we assume a finite production capacity per period. Assuming stationary data, a convex one-period cost function and a discrete demand distribution, we show (under a few additional unrestrictive assumptions) that a modified base-stock policy is optimal under the average-cost criterion; in addition, we characterize the optimal base-stock level.

Authors
Awi Federgruen and Paul Zipkin
Format
Journal Article
Publication Date
Journal
Mathematics of Operations Research

Full Citation

Federgruen, Awi and Paul Zipkin
. “An inventory model with limited production capacity and uncertain demands I: The average-cost criterion.”
Mathematics of Operations Research
vol.
11
, (May 01, 1986):
193
-
207
.