Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
477900 | European Journal of Operational Research | 2006 | 24 Pages |
Abstract
We consider a stochastic inventory control problem with Markovian capacity and the option of order rejection. We show its optimal policy to be the combination of a capacity-dependent modified base-stock production policy and a capacity-dependent critical-point order acceptance policy. When capacity is stochastically monotone, we show that the policy parameters change over the current capacity level in an intuitive way. All these results can be extended to the infinite-horizon case, with or without cost discounting. Our computational study substantiates the benefits from both exploiting the Markovian behavior of the capacity and rejecting orders when necessary.
Keywords
Related Topics
Physical Sciences and Engineering
Computer Science
Computer Science (General)
Authors
Jian Yang, Xiangtong Qi, Yusen Xia, Gang Yu,