Two control policies for stochastic economic order quantity-type models

Two control policies for stochastic economic order quantity-type models

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Article ID: iaor20023124
Country: United States
Volume: 15
Issue: 4
Start Page Number: 445
End Page Number: 463
Publication Date: Jan 2001
Journal: Probability in the Engineering and Informational Sciences
Authors: ,
Keywords: control processes
Abstract:

We present the production version of two EOQ-type models in heavy traffic. The output is interpreted by random demand and the input by a deterministic production plus random returns. In the ON part of the cycle, the inventory content is a reflected Brownian motion, and in the OFF part, it is a Brownian motion with a negative drift. The ON/OFF periods generate an alternative renewal process and the content-level process is a regenerative process. Two control policies are considered. In one policy that is natural under conditions of continuous review, production is stopped when the content level in the ON period reaches a predetermined level q. In the other policy, which resembles periodic review, production is stopped when the ON time reaches a predetermined time t(0).

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