A PERIODIC REVIEW INVENTORY MODEL WITH MARKOVIAN SUPPLY AVAILABILITY

Occasional unavailability of materials and products has an impact on i nventory decisions of utility companies, manufacturers, wholesalers an d retailers. The possibility of periods of supply unavailability that start and end at random times has been recognized by inventory researc hers, and incorporated into continuous-review models. The goal of this work is to address a periodic-review setting, with setup costs, where the probability that an order placed now is filled in full, as oppose d to not at all, depends on whether supply was available in the previo us period. We prove that the optimal inventory policy is of an (s, S) type, where s depends on the state of the supplier in the last period, while S does not. Some other issues are briefly discussed.