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Optimal Service Policies and Finite Time Horizons

Author

Listed:
  • C. R. Carr

    (Purdue University, Lafayette, Indiana)

  • C. W. Howe

    (Purdue University, Lafayette, Indiana)

Abstract

This paper characterizes optimal service policies in terms of the frequency and timing of services which are intended to maintain a stock of assets. The model is non-stochastic. The results are obtained by a two-stage step-wise minimization procedure wherein dynamic programming is first used to characterize sub-optimal policies and then the calculus of finite differences is utilized to select the optimal policy. The effect of the time horizon on the optimal policy is emphasized throughout and, in two specific interpretations of the model, the classical results of the economic lot-size and equipment replacement policy are shown to be limits of more general policies.

Suggested Citation

  • C. R. Carr & C. W. Howe, 1962. "Optimal Service Policies and Finite Time Horizons," Management Science, INFORMS, vol. 9(1), pages 126-140, October.
    • Handle: RePEc:inm:ormnsc:v:9:y:1962:i:1:p:126-140
    DOI: 10.1287/mnsc.9.1.126
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    Cited by:

    1. Marshall Fisher & Kamalini Ramdas & Yu-Sheng Zheng, 2001. "Ending Inventory Valuation in Multiperiod Production Scheduling," Management Science, INFORMS, vol. 47(5), pages 679-692, May.
    2. Daning Sun, 2004. "Existence and Properties of Optimal Production and Inventory Policies," Mathematics of Operations Research, INFORMS, vol. 29(4), pages 923-934, November.
    3. Lap Mui Ann Chan & Awi Federgruen & David Simchi-Levi, 1998. "Probabilistic Analyses and Practical Algorithms for Inventory-Routing Models," Operations Research, INFORMS, vol. 46(1), pages 96-106, February.
    4. Li, Xiuhui & Wang, Qinan, 2007. "Coordination mechanisms of supply chain systems," European Journal of Operational Research, Elsevier, vol. 179(1), pages 1-16, May.
    5. Lap Mui Ann Chan & David Simchi-Levi, 1998. "Probabilistic Analyses and Algorithms for Three-Level Distribution Systems," Management Science, INFORMS, vol. 44(11-Part-1), pages 1562-1576, November.
    6. David Yao & Morton Klein, 1989. "Lot sizes under continuous demand: The backorder case," Naval Research Logistics (NRL), John Wiley & Sons, vol. 36(5), pages 615-624, October.
    7. Favaretto, Daniela & Pesenti, Raffaele & Ukovich, Walter, 2001. "Discrete frequency models for inventory management - an introduction," International Journal of Production Economics, Elsevier, vol. 71(1-3), pages 331-342, May.

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