(S,S) Inventory Policies in a Nonstationary Demand Environment. Appendices.

Abstract : This investigation examines the situation in which demand distributions are independent, but not identically distributed, and vary in a cyclic manner. Products that experience seasonal demands are a typical example of such a demand process. A detailed analysis of the nature of optimal policies in the nonstationary environment is presented. The behavior of selected operating characteristics such as period-end inventory, backlogged demand, frequency of stockout, replenishment frequency, and associated costs also are examined. The above performance measures for an individual inventoried good are aggregated over all goods to provide an analysis of the multi-item system behavior. Approximately optimal (s,S) policies are derived for the nonstationary environment. The operating characteristics of approximately optimal policies are compared with those of optimal policies. The statistical phenomena are studied by means of a computer simulation program using time series analysis techniques.