Replenishment Policy with Limited Price Information

Xiaoyue Zhang, Wenqiang Dai (), Xiaoqiang Cai () and Xiaoyu Zhou ()
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Xiaoyue Zhang: School of Management and Economics, University of Electronic Science and Technology of China, Chengdu 611731, P. R. China
Wenqiang Dai: School of Management and Economics, University of Electronic Science and Technology of China, Chengdu 611731, P. R. China
Xiaoqiang Cai: School of Science and Engineering & Shenzhen, Research Institute of Big Data, The Chinese University of Hong Kong, Shenzhen 518172, P. R. China
Xiaoyu Zhou: School of Management and Economics, University of Electronic Science and Technology of China, Chengdu 611731, P. R. China

Asia-Pacific Journal of Operational Research (APJOR), 2023, vol. 40, issue 03, 1-26

Abstract: In this paper, we seek to provide real-time replenishment policy for a capacitated company that faces an exogenous demand and has to procure and store sufficient quantities of certain items with uncertain procurement prices. The objective is to minimize the total cost of the procuring cost and inventory holding cost without stock out. Motivated by the fact that a large variability in the price process often makes forecasting difficult, in contrast to the traditional approaches of the stochastic inventory theory, we study this problem from the perspective of competitive analysis who is free of any price distribution assumption. We propose an online replenishment model, which generalizes several previous online models. We give a real-time replenishment policy whose decisions are made based entirely on the past and present prices and the current inventory level. We prove that our policy achieves superior performance, and outperforms all of the previous theoretical results. Furthermore, we present the numerical studies to show that our replenishment policy achieves an even better empirical performance.

Keywords: Replenishment policy; uncertain price; competitive analysis; holding cost (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1142/S0217595922500294

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