Batch Quantities when Forecasts are Improving

This paper considers the choice of initial batch quantities when demand forecasts are improving. We assume that the standard deviation of the demand per period is decreasing exponentially and approaching a long-run value. A discrete time stochastic single-level inventory model is considered. There are traditional holding and backorder costs as well as an ordering cost. The ordering periods must be determined in advance, and we wish to determine a suitable schedule.