Newsboy Characterizations for the Optimal Reorder Levels of Multi-Echelon Inventory Systems with Fixed Batch Sizes
نویسنده
چکیده
This note considers an N -stage serial production/inventory system where materials flow from one stage to another in fixed batches. Linear holding and penalty costs (for backorders) are assumed. By Chen [2000], echelon stock (R,nQ) policies are optimal for such systems. Based on the results of Chen [1998], we show that the optimal reorder levels satisfy newsboy inequalities (equalities) when the demand has a discrete (continuous) distribution. The newsboy inequalities/equalities show a direct relation between the probability of no-stockout at the most downstream point and the cost parameters. Thus, they contribute to the understanding of optimal control. Also, they are easy to explain to managers and non-mathematical oriented students.
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