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arXiv · 2006.06912

A Marginal Analysis Framework to Incorporate the Externality Effect of Ordering Perishables

Katsunobu Sasanuma·Mohammad Delasay·Christine Pitocco·Alan Scheller-Wolf·Thomas Sexton
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Abstract

Finding the optimal policy for multi-period perishable inventory systems requires solving computationally-expensive stochastic dynamic programs (DP). To avoid the difficulty of solving DP models, we propose a framework that uses an externality term to capture the long-term impact of ordering decisions on the average cost over an infinite horizon. By approximating the externality term, we yield a tractable approximate optimality condition, which is solved through standard marginal analysis. The resulted policy is near-optimal in long-run average cost and ordering decisions.

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Katsunobu Sasanuma, Mohammad Delasay, Christine Pitocco, Alan Scheller-Wolf, Thomas Sexton. 2020-06-12. A Marginal Analysis Framework to Incorporate the Externality Effect of Ordering Perishables. https://arxiv.org/abs/2006.06912

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