An improved method for analysis of stochastic stock decision models

The stochastic decision model used in traditional stock management is improved, and a model of expected cost introduced which is based on the nonlinear loss of being out of stock. This model reflects the asymmetric characteristic between the loss of being out of stock and the loss of surplus stock. As compared with the traditional model, this model leaves out the computation of variance and avoids the difficulty of the dual objectives of traditional model. This model is used to explain the real problem of high stock levels in Chinese enterprises nowadays. It points out that this model is of important significance in supply chain management.