A Supply Network Model with Base-Stock Control and Service Requirements

Markus Ettl (), Gerald E. Feigin (), Grace Y. Lin () and David D. Yao ()
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Markus Ettl: IBM Research Division, T.J. Watson Research Center, Yorktown Heights, New York 10598
Gerald E. Feigin: i2 Technologies, Inc., Irving, Texas 75039
Grace Y. Lin: IBM Research Division, T.J. Watson Research Center, Yorktown Heights, New York 10598
David D. Yao: IEOR Department, Columbia University, New York, New York 10027-6699

Operations Research, 2000, vol. 48, issue 2, 216-232

Abstract: We develop a supply network model that takes as input the bill of materials, the (nominal) lead times, the demand and cost data, and the required customer service levels. In return, the model generates the base-stock level at each store---the stocking location for a part or an end-product, so as to minimize the overall inventory capital throughout the network and to guarantee the customer service requirements. The key ingredient of the model is a detailed, albeit approximate, analysis of the actual lead times at each store and the associated demand over such lead times, along with a characterization of the operation at each store via an inventory-queue model. The gradients are derived in explicit forms, and a conjugate gradient routine is used to search for the optimal solution. Several numerical examples are presented to validate the model and to illustrate its various features.

Keywords: Inventory/production; multiechelon: inventory optimization in complex supply chains; Queues; applications: queueing approximations for inventory applications; Programming; nonlinear; applications: constrained nonlinear optimization (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (54)

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