Robust Inventory Financing Model with Partial Information. (11th June 2014)

• Record Type: Journal Article
• Authors: Wang, Yong; Zhou, Jixiang; Sun, Hailei; Jiang, Lin
• Other Names: Charles Vincent Academic Editor.
• Is Part Of: Journal of applied mathematics. Volume 2014(2014)
• Publication Date: 2014-06-11
• Subjects: Mathematics -- Periodicals; 519.05
• DOI: 10.1155/2014/236083
• Languages: English
• ISSNs: 1110-757X

Abstract

Abstract : Given current fast-changing market conditions and difficulty in obtaining financing for small- and medium-sized enterprises, this paper studies the robust inventory financing model under partial information, that is, where the demand distribution is partly known. Two demand information cases are discussed: (1) the mean and variance and (2) the support of the demand distribution. In this setting, the robust method that maximizes the worst-case profit and minimizes the firm's maximum possible regret of not acting optimally would be used to formulate the optimal sales quantity. We show that the approach used in this paper is tractable, and we provide an explicit expression for the robust optimal policy. We then use numerical examples to compare the firm's losses under two demand information cases with those occurring under demand certainty. More importantly, the numerical examples indicate that our robust inventory financing model can obtain a robust but not conservative solution.