The economic consequences of a production and inventory control policy


In this paper, we investigate the economic performance of a generalized Order-Up-To policy in relation to an Auto-Regressive stochastic demand process. We focus on the case where the physical production/distribution lead-time is one period. We use the Net Present Value principle to evaluate the cash flows associated with inventory and order related costs. We show that the classical Order-Up-To policy is no longer optimal when a broader range of costs is considered in the objective function.

17th International Conference on Production Research, 3rd-7th August, Virginia, USA, 8 pages