Article ID: | iaor20164634 |
Volume: | 63 |
Issue: | 1 |
Start Page Number: | 186 |
End Page Number: | 197 |
Publication Date: | Feb 2015 |
Journal: | Operations Research |
Authors: | Roundy Robin O, Robinson Lawrence W, Zhang Rachel Q, Chen Lucy Gongtao |
Keywords: | decision, optimization, economics, demand, inventory, stochastic processes |
In today’s business environment, unpredictable economic and noneconomic forces can affect firms’ operational costs and discount factors, as well as demand. In this paper, we incorporate these uncertainties into a single‐product, periodic‐review, finite‐horizon stochastic inventory system by modeling operational costs, discount factors, and demands as stochastic processes that evolve over time. We study three stockout protocols and establish conditions under which (