Bounds, Heuristics, and Approximations for Distribution Systems

Guillermo Gallego (), Özalp Özer () and Paul Zipkin ()
Additional contact information
Guillermo Gallego: Columbia University, 500 West 120th Street, MC 4704, New York, New York 10027
Özalp Özer: Stanford University, Terman 314, 380 Panama Way, Stanford, California 94305
Paul Zipkin: Fuqua School of Business, Duke University, Durham, North Carolina 27708

Operations Research, 2007, vol. 55, issue 3, 503-517

Abstract: This paper develops simple approximate methods to analyze a two-stage distribution system consisting of one warehouse and multiple retailers with stochastic demand. We consider local and central control schemes. The main ideas are based on relaxing and or decomposing the system into more manageable newsvendor-type subsystems. We also provide bounds on the optimal policy and the optimal expected cost. We show that one of the heuristics is asymptotically optimal in the number of retailers. These results provide practically useful techniques as well as insights into stock-positioning issues and the drivers of system performance.

Keywords: inventory; production; multi-item; echelon; stage; approximation; heuristics; uncertainty; stochastic; operating characteristics (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (12)

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