Author:
Berman Oded,Perry David,Stadje Wolfgang
Abstract
We study a stochastic fluid EOQ-type model operating in a Markovian
random environment of alternating good and bad periods determining the
demand rate. We deal with the classical problem of “when to place an
order” and “how big it should be,” leading to the
trade-off between the setup cost and the holding cost. The key functionals
are the steady-state mean of the content level, the expected cycle length
(which is the time between two large orders), and the expected number of
orders in a cycle. These performance measures are derived in closed form
by using the level crossing approach in an intricate way. We also present
numerical examples and carry out a sensitivity analysis.
Publisher
Cambridge University Press (CUP)
Subject
Industrial and Manufacturing Engineering,Management Science and Operations Research,Statistics, Probability and Uncertainty,Statistics and Probability
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