A characterization of optimal base‐stock levels for a multistage serial supply chain

Peter Berling and Victor Martínez‐ de‐Albéniz

Naval Research Logistics (NRL), 2016, vol. 63, issue 1, 32-46

Abstract: In this article, we present a multistage model to optimize inventory control decisions under stochastic demand and continuous review. We first formulate the general problem for continuous stages and use a decomposition solution approach: since it is never optimal to let orders cross, the general problem can be broken into a set of single‐unit subproblems that can be solved in a sequential fashion. These subproblems are optimal control problems for which a differential equation must be solved. This can be done easily by recursively identifying coefficients and performing a line search. The methodology is then extended to a discrete number of stages and allows us to compute the optimal solution in an efficient manner, with a competitive complexity. © 2016 Wiley Periodicals, Inc. Naval Research Logistics 63: 32–46, 2016

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:wly:navres:v:63:y:2016:i:1:p:32-46

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