On Properties of Discrete (r,q) and (s,T) Inventory Systems
We consider single-item (r, q) and (s, T) inventory systems with integer-valued demand processes. While most of the inventory literature studies continuous approximations of these models and establishes joint convexity properties of the policy parameters in the continuous space, we show that these properties no longer hold in the discrete space, in the sense of linear interpolation extension and L♮-convexity. This nonconvexity can lead to failure of optimization techniques based on local optimality to obtain the optimal inventory policies. It can also make certain comparative properties established previously using continuous variables invalid. We revise these properties in the discrete space.
(r, Q) policy, (s, T) policy, discrete convexity, inventory/production
Operations and Supply Chain Management
European Journal of Operational Research
ANG, Teck Meng Marcus; SONG, Jing-Sheng; WANG, Mingzheng; and ZHANG, Hanqin.
On Properties of Discrete (r,q) and (s,T) Inventory Systems. (2013). European Journal of Operational Research. 229, (1), 95-105. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/3022