A Markovian Decision Model for a Joint Replacement and Stocking Problem

Two important classes of problems encountered by industry and government are those dealing with replacement policies and ordering policies. These problems are usually treated separately. A particular model which treats the replacement and stocking problems as one is considered in this paper. It is formulated as a denumerable state Markovian decision model. It is shown that the optimal decision policy has a particular structure. In attaining the optimal policy, this structure is exploited so that an optimal policy can be obtained in a finite number of steps.