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2914. On the Stochastic Inventory Problem Under Order Capacity Constraints
Invited abstract in session WA-49: Stochastic inventory systems, stream Lot Sizing, Lot Scheduling and Production Planning.
Wednesday, 8:30-10:00Room: M1 (building: 101)
Authors (first author is the speaker)
| 1. | Roberto Rossi
|
| Business School, University of Edinburgh | |
| 2. | zhen chen
|
| Brunel University London | |
| 3. | Armagan Tarim
|
| University College Cork |
Abstract
We consider the single-item single-stocking location stochastic inventory system under a fixed ordering cost component. A long-standing problem is that of determining the structure of the optimal control policy when this system is subject to order quantity capacity constraints; to date, only partial characterisations of the optimal policy have been discussed.
An open question is whether a policy with a single continuous interval over which ordering is prescribed is optimal for this problem. Under the so-called “continuous order property” conjecture, we show that the optimal policy takes the modified multi-(s, S) form. Moreover, we provide a numerical counterexample in which the continuous order property is violated, and hence show that a modified multi-(s, S) policy is not optimal in general.
However, in an extensive computational study, we show that instances violating the continuous order property do not surface, and that the plans generated by a modified multi-(s, S) policy can therefore be considered, from a practical standpoint, near-optimal. Finally, we show that a modified (s, S) policy also performs well in this empirical setting.
Keywords
- Inventory
- Stochastic Optimization
- Production and Inventory Systems
Status: accepted
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