A periodic-review model with serially-correlated, inventory-level-dependent demand

It has been established that the demand rates of many consumer products are serially correlated and are dependent on the amount of inventory displayed to the customer. A periodic-review model is developed that considers both of these effects. An adaptive, base-stock policy based on the critical fractile is presented, and a solution methodology is developed. The effect of this demand pattern on the safety stock requirement is investigated.