A fluid EOQ model with a two-state random environment

Oded Berman, David Perry, Wolfgang Stadje

Research output: Contribution to journalArticlepeer-review

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.

Original languageEnglish
Pages (from-to)329-349
Number of pages21
JournalProbability in the Engineering and Informational Sciences
Volume20
Issue number2
DOIs
StatePublished - Apr 2006

ASJC Scopus subject areas

  • Statistics and Probability
  • Statistics, Probability and Uncertainty
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering

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