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A CONTINUOUS REVIEW MODEL WITH GENERAL SHELF AGE AND DELAY-DEPENDENT INVENTORY COSTS

Published online by Cambridge University Press:  09 October 2015

Awi Federgruen  and
Min Wang
Awi Federgruen
Affiliation:
Graduate School of Business, Columbia University, 3022 Broadway New York, NY 10025, USA E-mail: af7@columbia.edu
Min Wang
Affiliation:
LeBow College of Business, Drexel University, 3141 Chestnut Street, Philadelphia, PA 19104, USA E-mail: min.wang@drexel.edu
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Abstract

We analyze a continuous review inventory model with the marginal carrying cost of a unit of inventory given by an increasing function of its shelf age and the marginal delay cost of a backlogged demand unit by an increasing function of its delay duration. We show that, under a minor restriction, an (r, q)-policy is optimal when the demand process is a renewal process, and a state dependent (r, q)-policy is optimal when the demand is a Markov-modulated renewal process. We also derive various monotonicity properties for the optimal policy parameters r* and r* + q*.

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Type
Research Article
Information
Probability in the Engineering and Informational Sciences , Volume 29 , Issue 4 , October 2015 , pp. 507 - 525
Copyright
Copyright © Cambridge University Press 2015 

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