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The Q(s,S) control policy for the joint replenishment problem extended to the case of correlation among item-demands

Christian Larsen (chl@asb.dk)
Additional contact information
Christian Larsen: Department of Business Studies, Aarhus School of Business, Postal: The Aarhus School of Business, Fuglesangs Allé 4, 8210 Aarhus V, Denmark, http://www.asb.dk/staff/bs/chl.aspx?page=%7B803EFF10-69F7-4C0F-AEE3-F7F410E4B6F2%7D

No L-2007-01, CORAL Working Papers from University of Aarhus, Aarhus School of Business, Department of Business Studies

Abstract: We develop an algorithm to compute an optimal Q(s,S) policy for the joint replenishment problem when demands follow a compound correlated Poisson process. It is a non-trivial generalization of the work by Nielsen and Larsen (2005). We make some numerical analyses on two-item problems where we compare the optimal Q(s,S) policy to the optimal uncoordinated (s,S) policies. The results indicate that the more negative the correlation the less advantageous it is to coordinate. Therefore, in some cases the degree of correlation determines whether to apply the coordinated Q(s,S) policy or the uncoordinated (s,S) policies. Finally, we compare the Q(s,S) policy and the closely connected P(s,S) policy. Here we explain why the Q(s,S) policy is a better choice if item-demands are correlated.

Keywords: joint replenishment problem; compound correlated Poisson process (search for similar items in EconPapers)
Pages: 23 pages
Date: 2007-01-04
New Economics Papers: this item is included in nep-cmp
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Citations: View citations in EconPapers (1)

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