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Optimal Ordering Policies With Stochastic Demand And Price Processes

Author

Listed:
  • KIMITOSHI SATO

    (Graduate School of Finance, Accounting and Law, Waseda University, 1-4-1, Nihombashi, Chuo-ku, Tokyo 103-0027, Japan)

  • KATSUSHIGE SAWAKI

    (Graduate School of Business Administration, Nanzan University, 18 Yamazato-cho, Showa-ku, Nagoya 466-8673, Japan)

Abstract

In this paper, we consider an inventory model in which a firm uses the spot market for procurement in order to accomplish the minimization of total discounted costs. The model can be formulated as impulse control problem where the demand and spot price follow diffusion stochastic processes. We explore sufficient conditions under which an optimal policy exists. Furthermore, we derive an optimal policy as an (s, S) policy where s and S are uniquely determined as a solution of simultaneous equation. Finally, we show some analytical properties of the optimal policy. Some numerical examples are also presented.

Suggested Citation

  • Kimitoshi Sato & Katsushige Sawaki, 2012. "Optimal Ordering Policies With Stochastic Demand And Price Processes," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 29(06), pages 1-21.
    • Handle: RePEc:wsi:apjorx:v:29:y:2012:i:06:n:s0217595912500376
    DOI: 10.1142/S0217595912500376
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    Citations

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    Cited by:

    1. Kimitoshi Sato & Kyoko Yagi & Masahito Shimazaki, 2018. "A Stochastic Inventory Model for a Random Yield Supply Chain with Wholesale-Price and Shortage Penalty Contracts," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 35(06), pages 1-30, December.
    2. Shih-Hsien Tseng & Jia-Chen Yu, 2019. "Data-Driven Iron and Steel Inventory Control Policies," Mathematics, MDPI, vol. 7(8), pages 1-15, August.

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