Inventory Control with a Randomly Available Discount Purchase Price

Abstract

A mathematical model is developed for a basic single-commodity storage system in which the stock controller is faced with a randomly fluctuating purchase price. High- and low-price periods are defined and a purchasing policy is specified which depends upon both the number of units in storage and the price period in which the system is operating. For the case of random demand the limiting stochastic behaviour of the system is obtained and the cost of operating the system is derived.