Inventory management with partially observed nonstationary demand

DOI10.1007/S10479-009-0513-8zbMATH Open1194.90008arXiv1206.6283OpenAlexW2110785374MaRDI QIDQ993707FDOQ993707

Authors: Erhan Bayraktar, Michael Ludkovski 

Publication date: 20 September 2010

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

Abstract: We consider a continuous-time model for inventory management with Markov modulated non-stationary demands. We introduce active learning by assuming that the state of the world is unobserved and must be inferred by the manager. We also assume that demands are observed only when they are completely met. We first derive the explicit filtering equations and pass to an equivalent fully observed impulse control problem in terms of the sufficient statistics, the a posteriori probability process and the current inventory level. We then solve this equivalent formulation and directly characterize an optimal inventory policy. We also describe a computational procedure to calculate the value function and the optimal policy and present two numerical illustrations.

Full work available at URL: https://arxiv.org/abs/1206.6283

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zbMATH Keywords

hidden Markov modelinventory managementMarkov modulated Poisson processcensored demandpartially observable demand

Mathematics Subject Classification ID

Management decision making, including multiple objectives (90B50) Applications of queueing theory (congestion, allocation, storage, traffic, etc.) (60K30) Inventory, storage, reservoirs (90B05)

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Cited In (17)

• Regression Monte Carlo for impulse control
• A new stopping time model: a solution to a free-boundary problem
• Inventory control with modulated demand and a partially observed modulation process
• Filtering of a Partially Observed Inventory System
• On a stochastic inventory system with partially observed level and demand
• Optimal trade execution in illiquid markets
• Adaptive inventory control for nonstationary demand and partial information
• Bayesian switching multiple disorder problems
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• \((s,S)\) inventory systems with correlated demands
• Combining Acquisition Planning with Inventory Management Under Uncertain Demand
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• Bayesian quickest detection in sensor arrays
• Modelling of hydrological persistence for hidden state Markov decision processes

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