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An enhanced L-Shaped method for optimizing periodic-review inventory control problems modeled via two-stage stochastic programming

Felipe Silva Placido dos Santos and Fabricio Oliveira

European Journal of Operational Research, 2019, vol. 275, issue 2, 677-693

Abstract: This paper presents the development of an enhanced L-Shaped method applied to an inventory management problem that considers a replenishment control system based on the periodic review (R, S) policy. We consider single-item one-echelon problems with uncertain demands and partial backorder that are modeled using two-stage stochastic programming. To enable the consideration of large-scale problems, the classical single-cut L-Shaped method and its extended multi-cut form were initially applied. Preliminary computational results indicated that the classical L-Shaped method outperformed its multi-cut counterpart, even though the former required more iterations to converge to the optimal solution. This observation inspired the development of the techniques presented for enhancing the L-Shape method, which consist of the combination of a novel acceleration technique with an efficient formulation and valid inequalities for the proposed model. Numerical experiments suggest that the proposed approach significantly reduced the computational time required to solve large-scale problems.

Keywords: Stochastic programming; Inventory control; Uncertain demand; Partial backordering; L-Shaped method (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:275:y:2019:i:2:p:677-693

DOI: 10.1016/j.ejor.2018.11.053

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