Operations Research Transactions ›› 2013, Vol. 17 ›› Issue (1): 69-85.

• Original Articles • Previous Articles     Next Articles

Optimal (s,d,S) policy for a production-inventory system with pricing and setup cost

YANG Baimei1,2,  XU Yifan1   

  1. 1.  School of Management, Fudan University 2.  School of Business, Shanghai Dianji University
  • Online:2013-03-15 Published:2013-03-15

Abstract: We consider a continuous review production-inventory system with finite capacity and setup cost, which is controlled by an (s,d,S) policy. Unsatisfied demand is lost. When the machine is off, the inventory on hand can be sold at two different selling prices. While the machine is on, the inventory only can be sold at the high price. We show the method to find the optimal (s,d,S) control policy for this system and develop efficient algorithms to compute the optimal control parameters.

Key words: production-inventory system, setup cost, optimal pricing decision