Inventory management under highly uncertain demand

Authors:
Guillermo Gallego;Kaan Katircioglu;Bala Ramachandran
Affiliations:
Department of Industrial Engineering and Operations Research, Columbia University in the City of New York, S.W. Mudd Building, 500 West 120th Street, NY 10027, USA;IBM T. J. Watson Research Center, Yorktown Heights, NY 10598, USA;IBM T. J. Watson Research Center, Yorktown Heights, NY 10598, USA
Venue:
Operations Research Letters
Year:
2007

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Abstract

We show that base-stock levels first increase and then decrease as the standard deviation increases for a variety of non-negative random variables with a given mean and provide a distribution-free upper bound for optimal base-stock levels that grows linearly with the standard deviation and then remains constant.