Computationally Simple and Unified Approach to Finite and In finite Horizon Clark-Scarf Inventory Model

31 Pages Posted: 28 May 2010 Last revised: 3 Apr 2012

See all articles by Charu Sinha

Charu Sinha

Chapman University - The George L. Argyros School of Business & Economics

Matthew J. Sobel

Case Western Reserve University; Weatherhead School of Management, Case Western Reserve University

Volodymyr Babich

McDonough School of Business, Georgetown University

Date Written: May 27, 2010

Abstract

We show that an easily computed and simply structured policy for making workorder decisions is optimal in the Clark-Scarf inventory model. That is a model of a make-to-stock multistage serial manufacturing process with convex costs of finished goods inventory, a set-up cost for purchasing, linear costs of work-in-process inventories, and backlogging of excess demand. The criteria here include the expected present value of costs (in finite and infinite horizons) and long-run average cost per period. Moreover, the same myopic policy that is optimal for the finite horizon model is optimal also for the infinite horizon model. This permits a unified approach to the various criteria.

Keywords: MDP, Myopic Policies, Inventory Policies, Serial Inventory System

JEL Classification: B11, C61, C63

Suggested Citation

Sinha, Charu and Sobel, Matthew J. and Sobel, Matthew J. and Babich, Volodymyr, Computationally Simple and Unified Approach to Finite and In finite Horizon Clark-Scarf Inventory Model (May 27, 2010). Available at SSRN: https://ssrn.com/abstract=1616943 or http://dx.doi.org/10.2139/ssrn.1616943

Charu Sinha

Chapman University - The George L. Argyros School of Business & Economics ( email )

333 N. Glassell
Orange, CA 92866
United States

Matthew J. Sobel

Case Western Reserve University ( email )

10900 Euclid Ave.
Cleveland, OH 44106
United States

HOME PAGE: http://https://weatherhead.case.edu/faculty/emeriti-faculty/matthew-sobel

Weatherhead School of Management, Case Western Reserve University ( email )

10900 Euclid Ave.
Cleveland, OH 44106-7235
United States

Volodymyr Babich (Contact Author)

McDonough School of Business, Georgetown University ( email )

3700 O Street, NW
Washington, DC 20057
United States

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