Periodic Review Inventory Models with Variable Periods

Abstract

All periodic review models in the inventory literature have assumed a fixed length of the review periods. In this paper, we extend the work of Chiang [International Journal of Production Economics, 115 (2008) 433-438], and consider periodic review models where the review periods are of a variable length and there is a fixed cost or ordering. Assuming that period lengths are independently and identically distributed, we show that an order-up-to or (s, S) policy is optimal for the infinite horizon problem. The periodic review policies developed are thus easy to implement. The computation shows that ignoring the period length variability can incur unnecessary large costs, especially if the fixed cost of ordering is negligible and/or shortage is costly.