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Near-optimal (r,Q) policies for a two-stage serial inventory system with Poisson demand |
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| Authors: | Lei Yang Jian YangGang Yu Hanqin Zhang |
| Institution: | a School of Economics and Commerce, South China University of Technology, Guangzhou, Guangdong 510006, PR China b Department of Mechanical and Industrial Engineering, New Jersey Institute of Technology, Newark, NJ 07102, USA c The Store Corporation, Shanghai 201203, PR China d Academy of Mathematics and Systems Science, The Chinese Academy of Sciences, Beijing 100080, PR China e NUS Business School, Singapore |
| 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. |
| Keywords: | Multi-echelon inventory (r Q) policy Stochastic demand Algorithm |
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