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Optimal Ordering Policies for Stochastic Inventory Problems with Observed Information Delays
Author(s) -
Bensoussan Alain,
Çakanyιldιrιm Metin,
Feng Qi,
Sethi Suresh P.
Publication year - 2009
Publication title -
production and operations management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.279
H-Index - 110
eISSN - 1937-5956
pISSN - 1059-1478
DOI - 10.1111/j.1937-5956.2009.01028.x
Subject(s) - computer science , inventory theory , operations research , order (exchange) , stock (firearms) , inventory control , mathematical optimization , process (computing) , stochastic process , economics , mathematics , statistics , finance , engineering , operating system , mechanical engineering
Information delays exist in an inventory system when it takes time to collect, process, validate, and transmit inventory/demand data. A general framework is developed in this paper to describe information flows in an inventory system with information delays. We characterize the sufficient statistics for making optimal decisions. When the ordering cost is linear, the optimality of a state‐dependent base‐stock policy is established even when information flows are allowed to cross over time. Additional insights into the problem are obtained via a comparison between our models and the models with stochastic order lead times. We also show that inventory can substitute for information and vice versa.