Inventory control with modulated demand and a partially observed modulation process

DOI10.1007/S10479-022-04932-9MaRDI QIDQ6099409zbMATH OpenOpenAlexFDO

Authors Satya S. Malladi, Alan L. Erera, Chelsea C. White

Publication date 20 June 2023

Published in Annals of Operations Research (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1803.06742

zbMATH Keywords

base stock policymyopic optimalitynonstationary demandpartially observedPOMDP

Mathematics Subject Classification ID

Inventory, storage, reservoirs (90B05) Markov and semi-Markov decision processes (90C40)

Abstract: We consider a periodic review inventory control problem having an underlying modulation process that affects demand and that is partially observed by the uncensored demand process and a novel additional observation data (AOD) process. We present an attainability condition, AC, that guarantees the existence of an optimal myopic base stock policy if the reorder cost $K=0$ and the existence of an optimal $(s,S)$ policy if $K>0$, where both policies depend on the belief function of the modulation process. Assuming AC holds, we show that (i) when $K=0$, the value of the optimal base stock level is constant within regions of the belief space and that each region can be described by two linear inequalities and (ii) when $K>0$, the values of $s$ and $S$ and upper and lower bounds on these values are constant within regions of the belief space and that these regions can be described by a finite set of linear inequalities. A heuristic and bounds for the $K=0$ case are presented when AC does not hold. Special cases of this inventory control problem include problems considered in the Markov-modulated demand and Bayesian updating literatures.

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Cited in

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