Premium
Optimal inventory control policy for periodic‐review inventory systems with inventory‐level‐dependent demand
Author(s) -
Chen Youhua Frank,
Lu Ye,
Xu Minghui
Publication year - 2012
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/nav.21498
Subject(s) - expediting , inventory control , service level , perpetual inventory , operations research , inventory theory , economic shortage , safety stock , order (exchange) , lost sales , service (business) , business , operations management , product (mathematics) , lead time , stock (firearms) , computer science , control (management) , economics , marketing , supply chain , mathematics , finance , philosophy , government (linguistics) , linguistics , engineering , geometry , management , mechanical engineering , artificial intelligence
We consider a setting in which inventory plays both promotional and service roles; that is, higher inventories not only improve service levels but also stimulate demand by serving as a promotional tool (e.g., as the result of advertising effect by the enhanced product visibility). Specifically, we study the periodic‐review inventory systems in which the demand in each period is uncertain but increases with the inventory level. We investigate the multiperiod model with normal and expediting orders in each period, that is, any shortage will be met through emergency replenishment. Such a model takes the lost sales model as a special case. For the cases without and with fixed order costs, the optimal inventory replenishment policy is shown to be of the base‐stock type and of the ( s,S ) type, respectively. © 2012 Wiley Periodicals, Inc. Naval Research Logistics, 2012