Optimal Policy for Inventory Management with Periodic and Controlled Resets

Lee, Y., Mintz, Y., Aswani, A., Shen, Z. M., & Yang, C. (2025). Optimal policy for inventory management with periodic and controlled resets. Manufacturing & Service Operations Management, 27(5), 1484–1496. https://doi.org/10.1287/msom.2022.0318

Inventory management problems with periodic and controllable resets occur in the context of managing water storage in the developing world and dynamically optimizing endcap promotion duration in retail outlets. In this paper, we consider a set of sequential decision problems in which the decision maker must not only balance holding and shortage costs but discard all inventory before a fixed number of decision epochs with the option for an early inventory reset. 

Methodology/results: Finding optimal policies for these problems through dynamic programming presents unique challenges because of the nonconvex nature of the resulting value functions. Moreover, this structure cannot be readily analyzed even with extended convexity definitions, such as K-convexity. 

Managerial implications: Our key contribution is to present sufficient conditions that ensure the optimal policy has an easily interpretable …