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A simple heuristic for computing non-stationary inventory policies based on function approximation
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DOI：10.1016/j.ejor.2024.02.016.png)
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Abstract
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We consider a finite -horizon periodic -review inventory system with fixed replenishment costs that faces nonstationary demands. The structure of the optimal control policy for this system has long been known. However, finding optimal policy parameters requires solving a large-scale stochastic dynamic program. To circumvent this, we devise a recursion -free approximation for the cost function of the problem. This translates into an efficient and effective heuristic to compute policy parameters that significantly outperforms earlier heuristics. Our approach is easy -to -understand and easy -to -use as it follows by elementary methods of shortest paths and convex minimization.
Keywords:
Inventory
Stochastic
Non-stationary demand
Approximation
Heuristic
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