Abstract
Invisible stock loss often occurs in inventory management systems, which is usually caused by quality deterioration, theft, and misplacement and makes inventory record inaccurate. Inaccurate inventory record will bring significant negative impact on the performance of inventory control and leads to severe stock-out. To eliminate this negative impact, in this paper, we develop a Markov decision process (MDP) model for an inventory control system with invisible stock loss, inaccurate record, and replenishment lead-time. Based on the MDP model, a robust inventory control policy is constructed by using the policy iteration technique. From numerical experiments, we find that the robust policy still has a reorder point/order-up-to level structure i.e., an (s, S) structure, and can significantly reduce the impact of inventory inaccuracy.
Published Version
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