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Forecast horizons for the discounted dynamic lot‐size problem allowing speculative motive
Author(s) -
Bean James C.,
Smith Robert L.,
Yano Candace A.
Publication year - 1987
Publication title -
naval research logistics (nrl)
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.665
H-Index - 68
eISSN - 1520-6750
pISSN - 0894-069X
DOI - 10.1002/1520-6750(198712)34:6<761::aid-nav3220340602>3.0.co;2-x
Subject(s) - discounting , horizon , time horizon , production (economics) , range (aeronautics) , variable (mathematics) , mathematical optimization , mathematical economics , dynamic programming , plan (archaeology) , economics , fixed cost , computer science , mathematics , microeconomics , finance , mathematical analysis , materials science , geometry , archaeology , composite material , history
This article considers the dynamic lot‐size problem under discounting, allowing speculative motive for holding inventory. A variable rolling‐horizon procedure is presented, which, under certain regularity conditions, is guaranteed to generate an infinite‐horizon optimal‐production plan. We also discuss a fixed rolling‐horizon procedure which provides a production plan that achieves an infinite‐horizon cost within a user‐specified tolerance ϵ of optimality. The fixed‐horizon length T * needed in this procedure is given in terms of a closed‐form formula that is independent of specific forecasted demands. We also present computational results for problems with a range of cost parameters and demand characteristics.