Good and bad news about the 4S1 T 5 policy

Published

Journal Article

This paper studies the optimization of the 4S1 T 5 inventory policy, where T is the replenishment interval and S is the order-up-to level. First, we demonstrate that the previously established joint convexity of the long-run average cost is false. Hence, the optimization is not straightforward. We then point out that the joint convexity concept depends on whether S and T are continuous or discrete variables, and in some situations it may not even be well defined. Nonetheless, we are able to identify several useful properties of the cost function, such as submodularity and coordinatewise convexity. Based on these properties, we develop efficient algorithms to compute the optimal policy for continuous and discrete demands. © 2012 INFORMS.

Full Text

Duke Authors

Cited Authors

  • Liu, F; Song, JS

Published Date

  • December 1, 2012

Published In

Volume / Issue

  • 14 / 1

Start / End Page

  • 42 - 49

Electronic International Standard Serial Number (EISSN)

  • 1526-5498

International Standard Serial Number (ISSN)

  • 1523-4614

Digital Object Identifier (DOI)

  • 10.1287/msom.1110.0353

Citation Source

  • Scopus