DETERMINATION OF THE OPTIMAL MAXIMUM ISSUE QUANTITY FOR LUMPY DEMAND ITEMS WHEN CONTROLLED BY AN (S,S) POLICY

In this paper, an effective algorithm is developed for the determinati on of the optimal maximum issue quantity for inventory items having lu mpy demand patterns. In order not to disrupt the inventory system, a c ustomer order with demand size exceeding the maximum issue quantity wi ll be filtered out of the system and satisfied by placing a special re plenishment order to a higher echelon. Otherwise, it will be met from stock. The control discipline is the (s,S) inventory policy with conti nuous review and the nature of the demands is approximated by a discre te compound Poisson distribution. The characteristics of the control p arameters, s and S, and the cost function with respect to w are studie d. The optimal values of the control parameters, w, s, and S, are dete rmined jointly. The theoretical results are illustrated with a numeric al example.