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OPTIMIZATION AND OPTIMALITY OF (s,S) STOCHASTIC INVENTORY SYSTEMS WITH NON-QUASICONVEX COSTS

Published online by Cambridge University Press:  06 March 2006

Frank Y. Chen  and
Y. Feng
Frank Y. Chen
Affiliation:
Department of Systems Engineering & Engineering Management, The Chinese University of Hong Kong, Shatin, Hong Kong, China, E-mail: yhchen@se.cuhk.edu.hk; yyfeng@se.cuhk.edu.hk
Y. Feng
Affiliation:
Department of Systems Engineering & Engineering Management, The Chinese University of Hong Kong, Shatin, Hong Kong, China, E-mail: yhchen@se.cuhk.edu.hk; yyfeng@se.cuhk.edu.hk
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Abstract

This article considers the optimization and optimality of single-item/location, infinite-horizon, (s,S) inventory models. Departing from the conventional approach, we do not assume the loss function describing holding and shortage costs per period to be quasiconvex. As the existing optimization algorithms have been established on the condition of quasiconvexity, our goal in this article is to develop a computational procedure for obtaining optimal (s,S) policies for models with general loss functions. Our algorithm is based on the parametric method commonly used in fractional programming and is intuitive, exact, and efficient. Moreover, this method allows us to extend the optimality of (s,S) policies to a broader class of loss functions that can be non-quasiconvex.

Type
Research Article
Information
Probability in the Engineering and Informational Sciences , Volume 20 , Issue 2 , April 2006 , pp. 287 - 306
Copyright
© 2006 Cambridge University Press

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