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Asymptotically Optimal Control of Make-to-Stock Systems

Author

Listed:
  • Xuefeng Gao

    (Department of Systems Engineering and Engineering Management, The Chinese University of Hong Kong, Hong Kong SAR, China)

  • Junfei Huang

    (Department of Decisions, Operations and Technology, CUHK Business School, The Chinese University of Hong Kong, Hong Kong SAR, China)

Abstract
We consider multiclass make-to-stock production/inventory systems in which the manager makes three decisions, including pricing, outsourcing, and scheduling, to maximize the long-run average profit. For a sequence of systems in the heavy-traffic regime, with linear or strictly convex holding/waiting cost functions, we propose a sequence of policies and establish its asymptotic optimality. Our proof combines the lower bound approach and a thorough steady-state analysis of the systems. We also establish general results on the existence and tightness of the stationary distributions of the state processes under a more general family of policies.

Suggested Citation

  • Xuefeng Gao & Junfei Huang, 2024. "Asymptotically Optimal Control of Make-to-Stock Systems," Mathematics of Operations Research, INFORMS, vol. 49(2), pages 948-985, May.
    • Handle: RePEc:inm:ormoor:v:49:y:2024:i:2:p:948-985
    DOI: 10.1287/moor.2021.0161
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