Care must be taken in extending the formulation and solution methodology of Federgruen and Zheng (1992) to include a stockout cost of a different dimensionality: $/unit, rather than $/unit/year. Federgruen and Zheng formulate this extended model for Poisson demand. We modify their formulation to...

We analyze a periodic review stochastic inventory model with T periods and I items. At the beginning of each period, the inventory position of each item can be adjusted by placing an order or by salvaging some of the inventory. There is a limited capacity for the total inventory held at the end...