## Awi Federgruen

*Cost formulas for continuous review inventory models with fixed delivery lags*

Coauthor(s): Zvi Schechner.

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**Abstract:**

In continuous review models with a fixed delivery lag *T*, the state of the system is conveniently described by the *net inventory position* = (inventory on hand) plus (outstanding orders), in spite of most cost components depending on the *actual inventory on hand*. To relate these two inventory concepts one observes that the distribution of the inventory on hand at time *t* + *T* is determined by the inventory position at time *t*. This explains the standard convention of charging the expected costs incurred in [*S*_{n} + *T*_{1}, *S*_{n}_{+1} + *T*) to the decision made at time *S*_{n}, where *S*_{n} denotes the *n*th decision epoch. This paper derives simple expressions for the expected costs in [*S*_{n} + *T*_{1}, *S*_{n} + 1 + *T*) as a function of the inventory position just after decision epoch *S*_{n}.

**Source:** *Operations Research*

**Exact Citation:**

Federgruen, Awi, and Zvi Schechner. "Cost formulas for continuous review inventory models with fixed delivery lags." *Operations Research* 31, no. 5 (1983): 957-965.

**Volume:** 31

**Number:** 5

**Pages:** 957-965

**Date:**
1983