Track: Inventory Management

Abstract

This paper considers the optimal inventory ordering, purchasing and holding policies of the profit-maximization problem over a finite horizon of length H, under two special conditions. First, there is change in at least one of the inventory costs, i.e. in the cost of ordering and/or purchasing/holding, at some point, Tduring the planning horizon. Second, it is not necessary to satisfy the demand, at a rate R, for the entire horizon. Rather, the objective is to meet the demand for a period of length H₁≤H, In fact, if the retailer does not have the obligation to meet the entire demand, this paper proves that it may be more profitable to meet only a portion or may be even none of the demand. Further, such a determination can be made up front, with H₁ as a decision variable. Numerical examples are included to identify the profit differences associated with the changes in the various costs and with the resulting demand-satisfaction occurrences