INVENTORY MODEL WITH LIMITED PRODUCTION CAPACITY AND UNCERTAIN DEMANDS I. THE AVERAGE-COST CRITERION.

Journal Article

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.

Duke Authors

Cited Authors

  • Federgruen, A; Zipkin, P

Published Date

  • 1986

Published In

  • Mathematics of Operations Research

Volume / Issue

  • 11 / 2

Start / End Page

  • 193 - 207