A dynamic-programming approach to continuous-review obsolescent inventory problems

A dynamic-programming approach to continuous-review obsolescent inventory problems

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Article ID: iaor19982082
Country: United States
Volume: 44
Issue: 8
Start Page Number: 757
End Page Number: 774
Publication Date: Dec 1997
Journal: Naval Research Logistics
Authors: , ,
Keywords: programming: dynamic
Abstract:

Inventory models of modern production and service operations should take into consideration possible exogenous failures or the abrupt decline of demand resulting from obsolescence. This article analyzes continuous-review versions of the classical obsolescence problem in inventory theory. We assume a deterministic demand model and general continuous random times to obsolescence (‘failure’). Using continuous dynamic programming, we investigate structural properties of the problem and propose explicit and workable solution techniques. These techniques apply to two fairly wide (and sometimes overlapping) classes of failure distributions: those which are increasing in failure rate and those which have finite support. Consequently, several specific failure processes in continuous time are given exact solutions.

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