Article ID: | iaor20052936 |
Country: | Netherlands |
Volume: | 161 |
Issue: | 1 |
Start Page Number: | 256 |
End Page Number: | 274 |
Publication Date: | Feb 2005 |
Journal: | European Journal of Operational Research |
Authors: | Kim Eun-Gab |
Keywords: | control processes, markov processes, queues: theory |
We treat an inventory control problem in a facility that provides a single type of service for customers. Items used in service are supplied by an outside supplier. To incorporate lost sales due to service delay into the inventory control, we model a queueing system with finite waiting room and non-instantaneous replenishment process and examine the impact of finite buffer on replenishment policies. Employing a Markov decision process theory, we characterize the optimal replenishment policy as a monotonic threshold function of reorder point under the discounted cost criterion. We present a simple procedure that jointly finds optimal buffer size and order quantity.