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Abstract We investigate a data‐driven dynamic inventory control problem involving fixed setup costs and lost sales. Random demand arrivals stem from a demand distribution that is only known to come out of a vast ambiguity set. Lost sales and demand ambiguity would together complicate the problem through censoring, namely, the inability of the firm to observe the lost portion of the demand data. Our main policy idea advocates periodically ordering up to high levels for learning purposes and, in intervening periods, cleverly exploiting the information gained in learning periods. By regret, we mean the price paid for ambiguity in long‐run average performances. When demand has a finite support, we can accomplish a regret bound in the order of which almost matches a known lower bound as long as inventory costs are genuinely convex. Major policy adjustments are warranted for the more complex case involving an unbounded demand support. The resulting regret could range between and depending on the nature of moment‐related bounds that help characterize the degree of ambiguity. These are improvable to when distributions are light‐tailed. Our simulation demonstrates the merits of various policy ideas.
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Voluntary environmental effort under ( s , S ) inventory policy*
Prior research on inventory control has been wide ranging, yet the environmental implications of an (s,S) inventory policy remain uninvestigated. This paper seeks to bridge the gap by characterising a firm’s voluntary environmental policy in the setup of an (s,S) inventory control policy. We suggest a mixed model structure wherein, due to the presence of fixed production costs, the inventory is determined continuously by sales and impulsively with ordering decisions obeying an optimal stopping process, while the uncertain sales process is controlled by continuous-time environmental goodwill-related decisions. We show that a firm should successively use voluntary environmental efforts to stimulate its sales when there is inventory and to increase backlogging to improve its production efficiency. Given the recurrent pattern of this policy, we conclude that voluntary environmental efforts under an (s,S) inventory control is not compatible with using these efforts as a means to generate ephemeral reputation insurance.
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- Award ID(s):
- 2204795
- PAR ID:
- 10522009
- Publisher / Repository:
- Taylor and Francis
- Date Published:
- Journal Name:
- International Journal of Production Research
- Volume:
- 62
- Issue:
- 1-2
- ISSN:
- 0020-7543
- Page Range / eLocation ID:
- 522 to 535
- Format(s):
- Medium: X
- Sponsoring Org:
- National Science Foundation
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- Free Publicly Accessible Full Text
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Accepted Manuscript
- Journal Article:
- https://doi.org/10.1080/00207543.2023.2242968
