Near-optimal (r,Q) policies for a two-stage serial inventory system with Poisson demand

Lei Yang, Jian Yang, Gang Yu and Hanqin Zhang

International Journal of Production Economics, 2011, vol. 133, issue 2, 728-735

Abstract: We consider a two-stage serial inventory system whose cost structure exhibits economies of scale in both stages. In the system, stage 1 faces Poisson demand and replenishes its inventory from stage 2, and the latter stage in turn orders from an outside supplier with unlimited stock. Each shipment, either to stage 2 or to stage 1, incurs a fixed setup cost. We derive important properties for a given echelon-stock (r, Q) policy for an approximation of the problem where all states are continuous. Based on these properties, we design a simple heuristic algorithm that can be used to find a near-optimal (r, Q) policy for the original problem. Numerical examples are given to demonstrate the effectiveness of the algorithm.

Keywords: Multi-echelon inventory (r; Q) policy Stochastic demand Algorithm (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (2)

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