Demand patterns for products with short life cycles or seasonal demand do not follow a discernible pattern for individual sales events and seasons due to uncertainty associated with effectiveness of product promotions, willingness of major retailers to carry product and their support, competition, and other unforeseen marketplace events/factors. These atypical demand patterns can be volatile an...

We consider the joint pricing and inventory control problem for a single product whose demand distribution in each period is determined both by whether or not a sale price is offered in the current period, and the number of periods since the last time the sale price was offered. We show that optimal inventory ordering policy is a state dependent base stock policy; however, the optimal pricing p...

The use of VMI at Wal-Mart on a large scale has attracted a great deal of attention in the industrial world. In a VMI program, the supplier assumes control of the inventory management for one or more retailers (Fry, 2002). The supplier monitors the inventory level at the retailers and makes the decisions related to the quantities of replenishment and the timing of shipments to the retailers. It...

In some retail contexts, higher inventories not only improve service levels, but also stimulate demand by serving as a promotional tool (e.g., by increasing product visibility). Motivated by a building-products retailer’s practice of stocking large quantities of products to stimulate demand, we study inventory management policies when demand is uncertain but increases with stocking quantity. Fo...

There exist many inventory control studies that consider either continuous review & continuous ordering, or periodic review & periodic ordering. Mixtures of the two are hardly ever studied. However, the model with periodic review and continuous ordering is highly relevant in practice, as information on the actual inventory level is not always up to date while making ordering decisions. This pap...

Abstract: We prove that an (S, S) policy is optimal in a continuous-review stochastic inventory model with a fixed ordering cost when the demand is (i) a diffusion process and a compound Poisson process with exponentially distributed jump sizes, and (ii) a mixture of a constant demand and a compound Poisson process. The proof uses the theory of impulse control. The Bellman equation of dynamic p...

We investigate optimal system design in a multi-location system in which supply is subject to disruptions. We examine the expected costs and cost variances of the system in both a centralized and a decentralized inventory system. We show that, when demand is deterministic and supply may be disrupted, using a decentralized inventory design reduces cost variance through the risk diversification e...

The occurrence of temporary stock-outs at retail is common in frequently purchased product categories. Available empirical evidence suggests that when faced with stock-outs, consumers are often willing to buy substitute items. An important implication of this consumer behavior is that observed sales of an item no longer provide a good measure of its core demand rate. Sales of items that stock-o...

We propose a nonparametric data-driven algorithm called DDM for the management of stochastic periodicreview multi-product inventory systems with a warehouse-capacity constraint. The demand distribution is not known a priori and the firm only has access to past sales data (often referred to as censored demand data). We measure performance of DDM through regret, the difference between the total e...