INVENTORY MODEL WITH LIMITED PRODUCTION CAPACITY AND UNCERTAIN DEMANDS I. THE AVERAGE-COST CRITERION.
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.
- Federgruen, A; Zipkin, P
- Mathematics of Operations Research
Volume / Issue
- 11 / 2
Start / End Page
- 193 - 207