End-of-Life Inventory Management Problem: Results and Insights
Emin Ozyoruk, Nesim K. Erkip, \c{C}a\u{g}{\i}n Ararat

TL;DR
This paper models and analyzes an end-of-life inventory management problem, introducing a dynamic programming approach and martingale theory to optimize decisions involving ordering, usage, and outside sourcing, with significant managerial insights.
Contribution
It formulates a novel optimal stopping problem with multiple decisions for end-of-life inventory management and provides analytical, structural, and numerical insights into optimal policies.
Findings
High potential loss if flexibility is not exploited
Optimal stopping times depend on demand and inventory dynamics
Numerical results demonstrate the value of the proposed approach
Abstract
We consider a manufacturer who manages the end-of-life phase and takes one of the three actions at each period: (1) place an order, (2) use existing inventory, (3) stop holding inventory and use an outside/alternative source. Two examples of this source are discounts for a new generation product and delegating operations. Demand is described by a non-homogeneous Poisson process, and the decision to stop holding inventory is described by a stopping time. After formulating this problem as an optimal stopping problem with additional decisions and presenting its dynamic programming algorithm, we use martingale theory to facilitate the calculation of the value function. Moreover, we show analytical results to understand the additional difficulties of the problem solved, as well as structural results on optimal stopping times. Furthermore, we devise an expandable taxonomy and categorize the…
Peer Reviews
No public reviews on file for this paper yet. If you reviewed it on a platform where reviews are public (OpenReview, ICLR, NeurIPS, ICML), you can paste yours below so the community can read it here.
Videos
No videos yet. Explain this paper in a talk, walkthrough, or lecture? Add one.
