Research Reports from the Department of Operations
Document Type
Report
Publication Date
3-24-1969
Abstract
Multiproduct periodic review dynamic inventory models with stochastic demands are studied. The case of two products in which one is a substitute for the other is considered in detail. For a given substitution policy, optimal restocking policies are obtained which minimize relevant costs over the envisaged planning horizon. When the planning horizon consists of more than one restocking periods the optimal restocking policies are given for both cases when excess demands are backlogged and when they are lost. Simple conditions on unit costs are obtained which guarantee that the optimal restocking policies are simple. Next a model is considered in which both substitution and reordering decisions are controllable. For the case when only one period is remaining in the horizon, optimal substitution policy for n-product case is obtained by linear programming. For two-product case n-period problem is solved and it is shown that under certain conditions on unit costs both the substitution and restocking policies are simple.
Keywords
Operations research, Inventory control--Mathematical models, Stochastic processes, Dynamic programming, Linear programming, Product management, Demand (Economic theory)--Mathematical models, Decision making--Mathematical models
Publication Title
Technical Memorandums from the Department of Operations, School of Management, Case Western Reserve University
Issue
Technical memorandum no. 138
Rights
This work is in the public domain and may be freely downloaded for personal or academic use
Recommended Citation
Shah, Arvindlal A., "Inventory Control of Substitute Products" (1969). Research Reports from the Department of Operations. 262.
https://commons.case.edu/wsom-ops-reports/262