Abstract

This paper considers a single-item, periodic review inventory model with uncertain demands. We assume a finite production capacity in each period. With stationary data, a convex one-period cost function and a continuous demand distribution, we show (under a few additional unrestrictive assumptions) that a modified basic-stock policy is optimal under the discounted cost criterion, both for finite and infinite planning horizons. In addition we characterize the optimal base-stock levels in several ways.

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 II: The discounted-cost criterion.”
Mathematics of Operations Research
vol.
11
, (May 01, 1986):
208
-
215
.