A transfer/clearing inventory model under sporadic review

Abstract.

We consider two locations in tandem of an inventory model, so-called the buffer and the store. The content levels in both locations are controlled simultaneously by transferring inventory from the buffer location to the store location. Under a certain cost function that takes into account the trade-off between the transferal set-up costs, the proportional holding and unsatisfied demand costs, the control policy of “when” and “how much” to transfer is restricted to the case of clearings under conditions of sporadic review. The objective is to find the optimal production rate or the optimal rate of the clearing process in heavy traffic in both locations. The purpose of this study is two-fold: we are interested both in the performance analysis of the relevant cost functionals and also in optimization and sensitivity analysis.