Average-Cost Optimality of a Base-Stock Policy for a Multi-Product Inventory Model with Limited Storage

  • Dirk Beyer
  • Suresh P. Sethi
  • Ramaswamy Sridhar
Part of the Advances in Computational Management Science book series (AICM, volume 4)


We consider a stochastic multi-product inventory model with a warehousing constraint with the objective of minimizing the expected long-run average cost. Using the vanishing discount approach, a dynamic programming equation and the corresponding verification result are established. The structure of optimal policies is analyzed when ordering cost of the commodities is linear and the inventory/backlog cost is convex. The optimal policy is shown to be a base-stock policy, in contrast to a modified base-stock policy optimal in the discounted cost version of the problem.


Optimal Policy Order Quantity Polynomial Growth Discount Cost Dynamic Programming Equation 


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© Springer Science+Business Media New York 2002

Authors and Affiliations

  • Dirk Beyer
  • Suresh P. Sethi
  • Ramaswamy Sridhar

There are no affiliations available

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