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Technical Note—New Sufficient Conditions for ( s, S ) Policies to be Optimal in Systems with Multiple Uncertainties

Author

Listed:
  • Lucy Gongtao Chen

    (NUS Business School, National University of Singapore, Singapore, 117592)

  • Lawrence W. Robinson

    (Johnson Graduate School of Management, Cornell University, Ithaca, New York 14853)

  • Robin O. Roundy

    (Department of Mathematics, Brigham Young University, Provo, Utah 84602)

  • Rachel Q. Zhang

    (Department of Industrial Engineering and Logistics Management, Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong)

Abstract

In today’s business environment, unpredictable economic and noneconomic forces can affect firms’ operational costs and discount factors, as well as demand. In this paper, we incorporate these uncertainties into a single-product, periodic-review, finite-horizon stochastic inventory system by modeling operational costs, discount factors, and demands as stochastic processes that evolve over time. We study three stockout protocols and establish conditions under which ( s, S ) inventory policies are optimal when discount factors, operational costs, and demands are stochastic and correlated both to one another and over time. Examples are provided to demonstrate nontrivial optimal policies in the absence of these sufficient conditions.

Suggested Citation

  • Lucy Gongtao Chen & Lawrence W. Robinson & Robin O. Roundy & Rachel Q. Zhang, 2015. "Technical Note—New Sufficient Conditions for ( s, S ) Policies to be Optimal in Systems with Multiple Uncertainties," Operations Research, INFORMS, vol. 63(1), pages 186-197, February.
    • Handle: RePEc:inm:oropre:v:63:y:2015:i:1:p:186-197
    DOI: 10.1287/opre.2014.1335
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    References listed on IDEAS

    as
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    Cited by:

    1. Satya S. Malladi & Alan L. Erera & Chelsea C. White, 2023. "Inventory control with modulated demand and a partially observed modulation process," Annals of Operations Research, Springer, vol. 321(1), pages 343-369, February.
    2. Sandun C. Perera & Suresh P. Sethi, 2023. "A survey of stochastic inventory models with fixed costs: Optimality of (s, S) and (s, S)‐type policies—Discrete‐time case," Production and Operations Management, Production and Operations Management Society, vol. 32(1), pages 131-153, January.

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