## Fangruo Chen

*Inventory policies with quantized ordering*

Coauthor(s): Yu-Sheng Zheng.

**Abstract:**

This article studies (*nQ, r*) inventory policies, under which the order quantity is restricted to be an integer multiple of a base lot size *Q*. Both *Q* and *r* are decision variables. Assuming the one-period expected holding and backorder cost function is unimodal, we develop an efficient algorithm to compute the optimal *Q* and *r*. The algorithm is facilitated by simple observations about the cost function and by tight upper bounds on the optimal *Q*. The total number of elementary operations required by the algorithm is linear in these upper bounds. By using the algorithm, we compare the performance of the optimal (*nQ, r*) policy with that of the optimal (*s, S*) policy through a numerical study, and our results show that the difference between them is small. Further analysis of the model shows that the cost performance of an (*nQ, r*) policy is insensitive to the choice of *Q*. These results establish that (*nQ, r*) models are potentially useful in many settings where quantized ordering is beneficial.

**Source:** *Naval Research Logistics*

**Exact Citation:**

Zheng, Yu-Sheng, and Fangruo Chen. "Inventory policies with quantized ordering." *Naval Research Logistics* 39, no. 3 (April 1992): 285-305.

**Volume:** 39

**Number:** 3

**Pages:** 285-305

**Date:**
4
1992