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On the relationship between cost and service models for general inventory systems
Author(s) -
Van Houtum G. J.,
Zijm W. H. M.
Publication year - 2000
Publication title -
statistica neerlandica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.52
H-Index - 39
eISSN - 1467-9574
pISSN - 0039-0402
DOI - 10.1111/1467-9574.00132
Subject(s) - generality , service (business) , computer science , point (geometry) , operations research , service model , mathematical optimization , mathematics , economics , geometry , economy , management
In this paper, we present a systematic overview of possible relations between cost and service models for fairly general single‐ and multi‐stage inventory systems. In particular, we relate various types of penalty costs in pure cost models to equivalent types of service measures in service models. We show how an optimal policy for a service model may be obtained from cost‐optimal policies in a related pure cost model. Pure cost models have been studied extensively in the literature. By our results it seems possible to transform many of the known optimal solutions for pure cost models to service models, which are more appropriate from a practical point of view. A number of examples are discussed to show the generality and the possibly far reaching consequences of the results.