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Infinite horizon optimal policy for an inventory system with two types of products sharing common hardware platforms

Mabel C Chou (bizchoum***at***nus.edu.sg)
Chee-Khian Sim (chee-khian.sim***at***port.ac.uk)
Xue-Ming Yuan (xmyuan***at***SIMTech.a-star.edu.sg)

Abstract: We consider a periodic review inventory system and present its optimal policy in the infinite horizon setting. The optimal inventory policy that maximizes the infinite horizon expected discount profit for the model is analytically obtained by relating to the finite horizon setting using results from variational analysis. Results are provided that elucidate the operations of the inventory system in the long run.

Keywords: Dynamic programming; inventory control; lateral transshipment; optimal policy; variational analysis

Category 1: Applications -- OR and Management Sciences

Citation: Accepted by OR Letters

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Entry Submitted: 12/30/2015
Entry Accepted: 12/30/2015
Entry Last Modified: 11/03/2016

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