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

Document Type

Article

Publication Date

10-10-2011

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. © 2011 Elsevier B.V. All right reserved.

Identifier

80051549071 (Scopus)

Publication Title

International Journal of Production Economics

External Full Text Location

https://doi.org/10.1016/j.ijpe.2011.03.030

ISSN

09255273

First Page

728

Last Page

735

Issue

2

Volume

133

Grant

09YJC630085

Fund Ref

National University of Singapore

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