Inventory systems optimization for dynamic stochastic and periodical demand

In this paper a description is given of the optimization model of a production-inventory system where there is a long term increasing demand with regular periodical variations, stochastic by nature. The joint optimization of input flow and warehouse size is described. The costs of input flow depend on the step within the period and on the intensity of production. In this model the costs of risk are included in the criterion function. A dynamic parametric programming model is presented where risk rate is a parameter. The application of this model on a water supply system is described.