Optimal inventory control policy for periodic-review inventory systems with inventory-level-dependent demand

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

24 Scopus Citations
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Original languageEnglish
Pages (from-to)430-440
Journal / PublicationNaval Research Logistics
Issue number6
Publication statusPublished - Sep 2012


We consider a setting in which inventory plays both promotional and service roles; that is, higher inventories not only improve service levels but also stimulate demand by serving as a promotional tool (e.g., as the result of advertising effect by the enhanced product visibility). Specifically, we study the periodic-review inventory systems in which the demand in each period is uncertain but increases with the inventory level. We investigate the multiperiod model with normal and expediting orders in each period, that is, any shortage will be met through emergency replenishment. Such a model takes the lost sales model as a special case. For the cases without and with fixed order costs, the optimal inventory replenishment policy is shown to be of the base-stock type and of the (s,S) type, respectively. © 2012 Wiley Periodicals, Inc. Naval Research Logistics, 2012 Copyright © 2012 Wiley Periodicals, Inc.

Research Area(s)

  • (s,S) policy, emergency orders, inventory-dependent demand, optimal inventory control, periodic-review inventory systems