Tuesday, August 12, 2008

Inventory -more about

Inventory levels are only incompletely observed. This may be due to non-observation
of demand, spoilage, misplacement, or theft of inventory. The non-observation of demand may be caused,
e.g., by transaction errors or by discrepancies/delays in transmitting/processing sales data. We study a
periodic review inventory system where the demand is not observed and the unmet demand is backordered.
As a result, the inventory manager cannot tell the exact quantities of inventories or backorders. However, by
looking at the shelf, he knows whether the inventory is positive or non-positive. Only with this information,
the inventory manager must determine the order quantity in each period that would minimize the expected
total discounted cost over an in¯nite-horizon.

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