(Q; r) model with Cv aRα of costs minimization

María Andrea Arias Serna, Maŕa Eugenia Puerta Yepes, Céesar Edinson Escalante Coterio, Gerardo Arango Ospina

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1 Scopus citations

Abstract

In the classical stochastic continuous review, (Q; r) model [18, 19], the inventory cost c(Q; r) has an averaging term which is given as an integral of the expected costs over the different inventory positions during the lead time on any given cycle. The main objective of the article is to study risk averse optimization in the classical (Q; r) model using CV aRα as a coherent risk measure with respect to the probability distribution of the demand D on inventory position costs (the sum of the inventory holding and backorder penality cost), for any given (generic) confidence level α ∈ [0, 1). We show that the objective function is jointly convex in (Q; r). We also compare the risk averse solution and some other solutions in both analytical and computational ways. Additionally, some general and useful results are obtained.

Original languageEnglish
Pages (from-to)135-146
Number of pages12
JournalJournal of Industrial and Management Optimization
Volume13
Issue number1
DOIs
StatePublished - 1 Jan 2017

Keywords

  • (Q,r) model
  • CVaR
  • Inventory models
  • Risk averse optimization
  • Risk measure

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