Structure of periodic review policies in the presence of random yield

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Abstract

This work provides a comprehensive analysis of a general periodic review production/inventory model with random (variable) yield. Existence of a order point whose value does not depend on yield being random is proved in the single period case without specifying the yield model and using a very general cost structure. When yield is a random multiple of lot size, the nonorder-up-to optimal policy is characterized for a finite-horizon model. The finite-horizon value functions are shown to converge to the solution of an infinite-horizon functional equation, and the infinite-horizon order point is shown to be no smaller than when yield is certain.

Original languageEnglish
Pages (from-to)634-643
Number of pages10
JournalOperations Research
Volume38
Issue number4
DOIs
StatePublished - 1990

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