Article ID: | iaor20052955 |
Country: | Netherlands |
Volume: | 160 |
Issue: | 1 |
Start Page Number: | 63 |
End Page Number: | 71 |
Publication Date: | Jan 2005 |
Journal: | European Journal of Operational Research |
Authors: | Chen Youhua Frank |
Keywords: | programming: fractional |
This paper considers two popular inventory models: the continuous review and periodic review reorder-point, order-quantity, control systems. Specifically we present two procedures which determine optimal values for the two control parameters (i.e., reorder-point and order-quantity) when the holding-and-shortage costs are non-quasi-convex. This cost structure may arise when non-linear cost rate is considered, for instance when the shortage cost is the shadow cost of a service-level constraint. The algorithms based on a fractional programming method are intuitive and efficient, and as the holding-and-shortage cost functions become quasi-convex, they are compatible to existing algorithms.