Tuesday, August 12, 2008

Inventory system

Information delays exist in an inventory system when it takes time to collect, process, validate, and transmit inventory/demand data. A general framework is developed in this paper to describe information flows in an inventory system with information delays. We characterize the sufficient statistics for making optimal decisions. When the ordering cost is linear, the optimality of a state-dependent base-stock policy is established even when information flows are allowed to cross over time. Additional insights into the problem are obtained via a comparison between regular models and the models with stochastic order lead times. Inventory can substitute for information and vice versa.

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