A dynamic ordering policy for a stochastic inventory problem with cash constraints

This paper investigates a stochastic inventory management problem in which cash-constrained small retailer periodically purchases product and sells it to customers while facing non-stationary demand. In each period, the retailer’s available cash restricts maximum quantity that can be ordered. There is fixed ordering cost incurred when an order issued by retailer. We introduce heuristic (s,C(x),S) policy inspired numerical findings structural analysis. The operates as follows: initial x less than s greater state-dependent value C(x), should brings close S possible; otherwise, not order. first determine values of controlling parameters s, C(x) via results dynamic programming test their performance extensive computational study. show performs well, with optimality gap 1%, average approximately 0.03%. then develop simple time-efficient method for computing solving mixed-integer linear problem: this 1% on our bed.