Optimal Ordering Policies for Stochastic Inventory Problems with Observed Information Delays

Production and Operations Management, Vol. 18, No. 5, pp. 546-559, 2009

14 Pages Posted: 28 Feb 2008 Last revised: 26 Oct 2009

See all articles by Alain Bensoussan

Alain Bensoussan

University of Texas at Dallas - Naveen Jindal School of Management; Hong Kong Polytechnic University - Faculty of Business; Ajou University

M. Çakanyıldırım

University of Texas at Dallas - Naveen Jindal School of Management

Qi Feng

Purdue University - Krannert School of Management

Suresh Sethi

University of Texas at Dallas - Naveen Jindal School of Management

Date Written: March 25, 2008

Abstract

Information delays exist in an inventory system when it takes time to collect, process, validate, and transmit inventory/demand data. A general framework is developed in this paper to describe information flows in an inventory system with information delays. We characterize the suffcient statistics for making optimal decisions. When the ordering cost is linear, the optimality of a state-dependent base-stock policy is established even when information flows are allowed to cross over time. Additional insights into the problem are obtained via a comparison between our models and the models with stochastic order lead times. We also show that inventory can substitute for information and vice versa.

Keywords: Information delay, partial observations, stochastic inventory problem, incomplete information, base-stock policy, dynamic programming, sufficient statistic, destination and origin determined dynamic delays, Information flow crossing

JEL Classification: C61, M11, D81, D83

Suggested Citation

Bensoussan, Alain and Cakanyildirim, Metin and Feng, Qi and Sethi, Suresh, Optimal Ordering Policies for Stochastic Inventory Problems with Observed Information Delays (March 25, 2008). Production and Operations Management, Vol. 18, No. 5, pp. 546-559, 2009. Available at SSRN: https://ssrn.com/abstract=1098458

Alain Bensoussan

University of Texas at Dallas - Naveen Jindal School of Management ( email )

800 West Campbell Rd
SM 30
Richardson, TX 75080-3021
United States
9728836117 (Phone)

HOME PAGE: http://www.utdallas.edu/~axb046100/

Hong Kong Polytechnic University - Faculty of Business

Dept SEEM
Systems Engr * Engr Mgmt
Hong Kong, Hong Kong
China

Ajou University ( email )

Ajou
France

Metin Cakanyildirim

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

Qi Feng

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

Suresh Sethi (Contact Author)

University of Texas at Dallas - Naveen Jindal School of Management ( email )

800 W. Campbell Road, SM30
Richardson, TX 75080-3021
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
301
Abstract Views
1,560
rank
100,336
PlumX Metrics