A Markovian Decision Model for a Joint Replacement and Stocking Problem

Abstract

Two important classes of problems encountered by industry and government are those dealing with replacement policies and ordering policies. These problems are usually treated separately. A particular model which treats the replacement and stocking problems as one is considered in this paper. It is formulated as a denumerable state Markovian decision model. It is shown that the optimal decision policy has a particular structure. In attaining the optimal policy, this structure is exploited so that an optimal policy can be obtained in a finite number of steps.