In this paper, we present a systematic overview of possible relations between cost and service models for fairly general single- and multi-stage inventory systems. In particular, we relate various types of penalty costs in pure cost models to equivalent types of service measures in service models. We show how an optimal policy for a service model may be obtained from cost-optimal policies in a related pure cost model. Pure cost models have been studied extensively in the literature. By our results it seems possible to transform many of the known optimal solutions for pure cost models to service models, which are more appropriate from a practical point of view. A number of examples are discussed to show the generality and the possibly far reaching consequences of the results.
|Place of Publication||Enschede|
|Publisher||University of Twente, Department of Applied Mathematics|
|Number of pages||23|
|Publication status||Published - 2000|
|Name||Memorandum / Faculty of Mathematical Sciences|
|Publisher||Department of Applied Mathematics, University of Twente|
van Houtum, G-J., & Zijm, W. H. M. (2000). On the relation between cost and service models for general inventory systems. (Memorandum / Faculty of Mathematical Sciences; No. 1522). Enschede: University of Twente, Department of Applied Mathematics.