Optimal inventory replenishment policy for a queueing system with finite waiting room capacity

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Abstract

We treat an inventory control problem in a facility that provides a single type of service for customers. Items used in service are supplied by an outside supplier. To incorporate lost sales due to service delay into the inventory control, we model a queueing system with finite waiting room and non-instantaneous replenishment process and examine the impact of finite buffer on replenishment policies. Employing a Markov decision process theory, we characterize the optimal replenishment policy as a monotonic threshold function of reorder point under the discounted cost criterion. We present a simple procedure that jointly finds optimal buffer size and order quantity.

Original languageEnglish
Pages (from-to)256-274
Number of pages19
JournalEuropean Journal of Operational Research
Volume161
Issue number1
DOIs
StatePublished - 16 Feb 2005

Keywords

  • Finite queueing system
  • Inventory management
  • Markov decision process
  • Optimal control

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