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Determining near optimal base-stock levels in two-stage general inventory systems

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  • Albrecht, Martin

Abstract

This paper proposes an easily implementable, scalable decomposition heuristic for determining near optimal base stocks in two-level general inventory systems. In this heuristic, the general system is decomposed into assembly systems—one for each end product. For these assembly systems, the base-stock levels are calculated separately, taking into account risk-pooling effects for the common components. Our numerical analyses yield two main insights: First, the base-stock levels determined by the heuristic are close-to-optimal. Second, considerable improvements can be obtained compared to common-sense heuristics.

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  • Albrecht, Martin, 2014. "Determining near optimal base-stock levels in two-stage general inventory systems," European Journal of Operational Research, Elsevier, vol. 232(2), pages 342-349.
    • Handle: RePEc:eee:ejores:v:232:y:2014:i:2:p:342-349
    DOI: 10.1016/j.ejor.2013.07.025
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    4. Martin Albrecht, 2021. "Component Allocation in Make-to-stock Assembly Systems," SN Operations Research Forum, Springer, vol. 2(2), pages 1-19, June.
    5. Albrecht, Martin, 2017. "Optimization of safety stocks in models with an order service level objective or constraint," European Journal of Operational Research, Elsevier, vol. 263(3), pages 900-909.

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