Title: A new optimal multi-product (Q, R, SS) policy with multivariate Markov stochastic demand forecasting model
Authors: Jie Chen; Zhixiang Chen
Addresses: Department of Mathematics, Hainan Tropical Ocean University, Sanya 572022, China; School of Business, Sun Yat-sen University, Guangzhou 510275, China ' School of Business, Sun Yat-sen University, Guangzhou 510275, China
Abstract: Multi-product inventory control is a challenging problem. Since its complexity in computation, many prior studies simplify the modelling conditions to assume that the demands are independent. In this paper, we consider a multi-product inventory system with stochastic demands which have multivariate Markov transition characteristics. We first study the demand transition process based on multivariate Markov theory, and construct a multivariate Markov demand model to forecast the stochastic demands of multiple products. Then, we propose a new optimisation model of inventory decision for multi-product under the multivariate Markov demand transition pattern. By solving the optimal solution of the model, we propose an optimal (Q, R, SS) policy to decide the ordering quantity Q, ordering point R, and safety stock SS. At last, we use a numerical example to demonstrate the application feasibility and efficiency of the proposed method.
Keywords: demand forecasting; stochastic demand; multi-product inventory system; multivariate Markov model; optimal (Q, R, SS) policy.
DOI: 10.1504/IJMOR.2019.096980
International Journal of Mathematics in Operational Research, 2019 Vol.14 No.1, pp.82 - 105
Received: 12 May 2016
Accepted: 06 Jul 2017
Published online: 14 Dec 2018 *