Determining near optimal base-stock levels in two-stage general inventory systems

Martin Albrecht

European Journal of Operational Research, 2014, vol. 232, issue 2, 342-349

Abstract: This paper proposes an easily implementable, scalable decomposition heuristic for determining near optimal base stocks in two-level general inventory systems. In this heuristic, the general system is decomposed into assembly systems—one for each end product. For these assembly systems, the base-stock levels are calculated separately, taking into account risk-pooling effects for the common components. Our numerical analyses yield two main insights: First, the base-stock levels determined by the heuristic are close-to-optimal. Second, considerable improvements can be obtained compared to common-sense heuristics.

Keywords: Supply chain management; Inventory management; Safety stocks; General inventory system (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:232:y:2014:i:2:p:342-349

DOI: 10.1016/j.ejor.2013.07.025

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