A recursion-free functional approximation for the dynamic inventory problem
Optimization and Control
2020-07-20 v1
Abstract
We consider the dynamic inventory problem with non-stationary demands. It has long been known that non-stationary (s, S) policies are optimal for this problem. However, finding optimal policy parameters remains a computational challenge as it requires solving a large-scale stochastic dynamic program. To address this, we devise a recursion-free approximation for the optimal cost function of the problem. This enables us to compute policy parameters heuristically, without resorting to a stochastic dynamic program. The heuristic is easy-to-understand and -use since it follows by elementary methods of convex minimization and shortest paths, yet it is very effective and outperforms earlier heuristics.
Cite
@article{arxiv.2007.08608,
title = {A recursion-free functional approximation for the dynamic inventory problem},
author = {Onur A. Kilic and S. Armagan Tarim},
journal= {arXiv preprint arXiv:2007.08608},
year = {2020}
}