Allocation policies and cost approximations for multilocation inventory systems

Awi Federgruen and Paul Zipkin

Naval Research Logistics Quarterly, 1984, vol. 31, issue 1, 97-129

Abstract: Consider a central depot that supplies several locations experiencing random demands. Periodically, the depot may place an order for exogenous supply. Orders arrive after a fixed leadtime, and are then allocated among the several locations. Each allocation reaches its destination after a further delay. We consider the special case where the penalty‐cost/holding‐cost ratio is constant over the locations. Several approaches are given to approximate the dynamic program describing the problem. Each approach provides both a near‐optimal order policy and an approximation of the optimal cost of the original problem. In addition, simple but effective allocation policies are discussed.

Date: 1984
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Persistent link: https://EconPapers.repec.org/RePEc:wly:navlog:v:31:y:1984:i:1:p:97-129

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