turkmath.org

A cost-minimizing (Q,R) policy can result in cost variability over replenishment cycles due to stochastic nature of the demand. This cost fluctuation may be undesirable for planning purposes in practice. We adopt a bi-objective approach to minimize the expected total costs and the lead-time cost range. A numerical study is conducted to demonstrate how costs can be stabilized using our approach. We further provide numerical comparisons of our approach with the cost-minimizing (Q,R) policy and a preliminary numerical analysis of its robustness with respect to the minmax distribution-free approach.