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Price-Directed Control of Remnant Inventory Systems

Author

Listed:
  • Daniel Adelman

    (The University of Chicago, Graduate School of Business, 1101 East 58th Street, Chicago, Illinois 60637)

  • George L. Nemhauser

    (Logistics Engineering Center, School of Industrial and Systems Engineering, Georgia Institute of Technology, Atlanta, Georgia 30332)

Abstract

Motivated by make-to-order cable manufacturing, we describe a remnant inventory system in which orders arrive for units of raw material that are produced-to-stock. As orders are satisfied, the partially consumed units of material, or remnants, are either scrapped or returned to inventory for future allocation to orders. We present a linear program that minimizes the long-run average scrap rate. Its dual prices exhibit many rational properties, including monotonicity and superadditivity. We use these prices in an integer-programming-based control scheme, which we simulate and compare with an existing control scheme previously used in practice.

Suggested Citation

  • Daniel Adelman & George L. Nemhauser, 1999. "Price-Directed Control of Remnant Inventory Systems," Operations Research, INFORMS, vol. 47(6), pages 889-898, December.
    • Handle: RePEc:inm:oropre:v:47:y:1999:i:6:p:889-898
    DOI: 10.1287/opre.47.6.889
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    References listed on IDEAS

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    Cited by:

    1. Alejandro Toriello & William B. Haskell & Michael Poremba, 2014. "A Dynamic Traveling Salesman Problem with Stochastic Arc Costs," Operations Research, INFORMS, vol. 62(5), pages 1107-1125, October.
    2. P A Huegler & J C Hartman, 2007. "Fulfilling orders for steel plates from existing inventory," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 58(9), pages 1156-1166, September.
    3. Daniel Adelman, 2004. "A Price-Directed Approach to Stochastic Inventory/Routing," Operations Research, INFORMS, vol. 52(4), pages 499-514, August.
    4. Daniel Adelman, 2003. "Price-Directed Replenishment of Subsets: Methodology and Its Application to Inventory Routing," Manufacturing & Service Operations Management, INFORMS, vol. 5(4), pages 348-371, May.
    5. Daniel Adelman, 2007. "Price-Directed Control of a Closed Logistics Queueing Network," Operations Research, INFORMS, vol. 55(6), pages 1022-1038, December.
    6. Rajgopal, Jayant & Wang, Zhouyan & Schaefer, Andrew J. & Prokopyev, Oleg A., 2011. "Integrated design and operation of remnant inventory supply chains under uncertainty," European Journal of Operational Research, Elsevier, vol. 214(2), pages 358-364, October.
    7. Silviya Valeva & Guodong Pang & Andrew J. Schaefer & Gilles Clermont, 2023. "Acuity-Based Allocation of ICU-Downstream Beds with Flexible Staffing," INFORMS Journal on Computing, INFORMS, vol. 35(2), pages 403-422, March.

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