A periodic-review inventory model with application to the continuous-review obsolescence problem

In this paper we consider a stochastic-demand periodic-review inventory model with sudden obsolescence. We characterize the structure of the optimal policy and propose a dynamic programming algorithm for computing its parameters. We then utilize this algorithm to approximate the solution to the continuous-review sudden obsolescence problem and general obsolescence distribution. We prove convergence of our approximation scheme, and demonstrate it numerically against known closed-form solutions of special cases.