Article ID: | iaor20113072 |
Volume: | 130 |
Issue: | 2 |
Start Page Number: | 196 |
End Page Number: | 202 |
Publication Date: | Apr 2011 |
Journal: | International Journal of Production Economics |
Authors: | Bagchi Uttarayan, Ramasesh Ranga, Hayya Jack C |
Keywords: | statistics: regression, simulation: applications |
The analysis of the full stochastic model in which both the demand per unit time and the lead time are stochastic is complex. Analysis of the reduced stochastic inventory models in which only one of the parameters (either the demand per unit time or the lead time) is stochastic and the other is constant is relatively less complex. In this paper we exploit insights from vector analysis and postulate an approximation that expresses the optimal cost of the full stochastic model in terms of the optimal costs of the two reduced models. We demonstrate the adequacy of the cost relationship in the context of one specific type of inventory model–a periodic review (