Optimal (r,nQ,T) batch ordering with quantized supplies

Publication year: 2012
Source: Computers & Operations Research, Volume 39, Issue 2, February 2012, Pages 259-268

A.G., Lagodimos , I.T., Christou , K., Skouri

We consider the control of a single-echelon inventory installation under the (r,nQ,T) batch ordering policy. Demand follows a stationary stochastic process and, when unsatisfied, is backordered. The supply process is quantized; so the policy base batch Q needs to satisfy the constraint Q=kg, where k is an integer and q an exogenous fixed supply lot, often reflecting physical supply limitations. Assuming continuous time and a standard cost structure, we determine the (r,nQ,T) policy variables that minimize total average cost per unit time subject to the supply lot constraint. While total average cost is not convex, we show that average holding…