ON THE (s,s) POLICY WITH FIXED INVENTORY HOLDING AND SHORTAGE COSTS

In this paper, we consider a dynamic stochastic inventory model with fixed inventory holding and shortage costs in addition to a fixed ordering cost. WE discuss a sufficient and necessary condition for an (s,S) policy to be optimal in the class of such stochastic inventory models. Furthermore, we explore how such a sufficient and necessary condition can be rewritten when the demand distribution is specified. Several examples such as uniform, exponential, normal and gamma distribution functions are treated. The main purpose of this paper is to show that the (s, 5) policy is still optimal under a simple condition even if fixed inventory costs are involved. Although Aneja. and Noori [1] consider a similar model only with fixed inventory shortage cost, our proof for the optimality of an (8, S) policy in the multi-period model is different from and much simpler than theirs.