Halkos, George and Kevork, Ilias and Tziourtzioumis, Chris (2014): Optimal inventory policies with an exact cost function under large demand uncertainty.

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Abstract
In this paper we investigate the minimization process of the exact cost function for a continuous review (Q,R) inventory model with nonnegative reorder point and fixed leadtime. Backorders are allowed and the unit shortage cost is used to determine the expected annual shortage cost. Provided that the leadtime demand has Jshaped or unimodal distribution satisfying specific assumptions we derive the general condition when the minimum cost is attained at a positive reorder point or at a reorder point equal to zero. Based on this condition a general algorithm is developed. Some numerical experimentation based on this algorithm using parameter values from the relevant literature indicates that with large demand uncertainty measured by the coefficient of variation the optimal inventory policies lead to excessively large orders and zero reorder points.
Item Type:  MPRA Paper 

Original Title:  Optimal inventory policies with an exact cost function under large demand uncertainty 
Language:  English 
Keywords:  Inventory; Continuous review model; Exact cost function; Convexity; Cost parameter values; General algorithm. 
Subjects:  C  Mathematical and Quantitative Methods > C1  Econometric and Statistical Methods and Methodology: General > C10  General C  Mathematical and Quantitative Methods > C6  Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C61  Optimization Techniques ; Programming Models ; Dynamic Analysis C  Mathematical and Quantitative Methods > C6  Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C63  Computational Techniques ; Simulation Modeling M  Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M1  Business Administration > M11  Production Management M  Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M2  Business Economics > M21  Business Economics 
Item ID:  60545 
Depositing User:  G.E. Halkos 
Date Deposited:  12 Dec 2014 06:01 
Last Modified:  23 Feb 2017 09:06 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/60545 