Dynamic Inventory Planning with Unknown Costs and Stochastic Demand

Generally ordering policies are done by two methods, including fix order quantity (FOQ) and fix order period (FOP). These methods are static and either the quantity of ordering or the procedure of ordering is fixing in throughout time horizon. In real environments, demand is varying in any period and may be considered as uncertainty. When demand is variable in any period, the traditional and static ordering policies with fix re-order points cannot be efficient. On the other hand, sometimes in real environments some costs may not be well-known or precise. Some costs such as holding cost, ordering cost and so on. Therefore, using the cost based inventory models may not be helpful. In this paper, a model is developed which can be used in the cases of stochastic and irregular demand, and also unknown costs. Also some attributes consisting of expected positive inventory level, expected negative inventory level and inventory confidence level are considered as objective functions instead the objective function of total inventory cost. A numerical example is also presented for more explanation.