Paper Info
Title
Note: Optimality Conditions for an (s, S) Policy with Proportional and Lump-Sum Penalty Costs.
Abstract
We consider the optimality of the ( s,S) policy for a periodic-review stochastic inventory problem with two types of shortage costs. The problem may arise in a rush-order application at a bank branch where the emergency provision costs during a foreign currency stockout are represented by proportional and lump-sum penalties. Aneja and Noori (1987) analyzed this problem and presented a set of conditions for the convexity of a particular function and made a claim about theK-convexity of another function to prove the optimality of the ( s,S) policy. We show that because the function that is claimed to beK-convex is actually concave over a subset of its domain, Aneja and Noori's arguments cannot be used to prove the optimality of the ( s,S) policy. However, we argue that Aneja and Noori's problem is equivalent to the typical lost-sales problem, and using this equivalence, we .nd a simple convexity condition that assures the optimality of the ( s,S) policy.
Year
DOI
Venue
2002
10.1287/mnsc.48.12.1635.443
Management Science
Keywords
DocType
Volume
shortage cost,lump-sum penalty costs,foreign currency stockout,simple convexity condition,particular function,optimality conditions,periodic-review stochastic inventory problem,typical lost-sales problem,rush-order application,emergency provision cost,bank branch,lump-sum penalty
Journal
48
Issue
ISSN
Citations 
12
0025-1909
2
PageRank 
References 
Authors
0.43
0
2
Name
Order
Citations
PageRank
Sila Çetinkaya114413.01
Mahmut Parlar228133.65