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Approximate analysis and optimization of batch ordering policies in capacitated supply chains


  • Karaman, Abdullah
  • Altiok, Tayfur


Devising manufacturing/distribution strategies for supply chains and determining their parameter values have been challenging problems. Linking production management to stock keeping processes improves the planning of the supply chain activities, including material management, culminating in improved customer service levels. In this study, we investigate a multi-echelon supply chain consisting of a supplier, a plant, a distribution center and a retailer. Material flow between stages is driven by reorder point/order quantity inventory control policies. We develop a model to analyze supply chain behavior using some key performance metrics such as the time averages of inventory and backorder levels, as well as customer service levels at each echelon. The model is validated against simulation, yielding good agreement of robust performance metrics. The metrics are then used within an optimization framework to design the supply chain so as to minimize expected total system costs. The outcome of the optimization framework specifies how to move inventory throughout the supply chain and how to set inventory control parameters, i.e., reorder levels and replenishment batch sizes.

Suggested Citation

  • Karaman, Abdullah & Altiok, Tayfur, 2009. "Approximate analysis and optimization of batch ordering policies in capacitated supply chains," European Journal of Operational Research, Elsevier, vol. 193(1), pages 222-237, February.
  • Handle: RePEc:eee:ejores:v:193:y:2009:i:1:p:222-237

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    References listed on IDEAS

    1. Andrew J. Clark & Herbert Scarf, 2004. "Optimal Policies for a Multi-Echelon Inventory Problem," Management Science, INFORMS, vol. 50(12_supple), pages 1782-1790, December.
    2. Nesim Erkip & Warren H. Hausman & Steven Nahmias, 1990. "Optimal Centralized Ordering Policies in Multi-Echelon Inventory Systems with Correlated Demands," Management Science, INFORMS, vol. 36(3), pages 381-392, March.
    3. Leroy B. Schwarz & Bryan L. Deuermeyer & Ralph D. Badinelli, 1985. "Fill-Rate Optimization in a One-Warehouse N-Identical Retailer Distribution System," Management Science, INFORMS, vol. 31(4), pages 488-498, April.
    4. Steven Nahmias & Stephen A. Smith, 1994. "Optimizing Inventory Levels in a Two-Echelon Retailer System with Partial Lost Sales," Management Science, INFORMS, vol. 40(5), pages 582-596, May.
    5. Antony Svoronos & Paul Zipkin, 1991. "Evaluation of One-for-One Replenishment Policies for Multiechelon Inventory Systems," Management Science, INFORMS, vol. 37(1), pages 68-83, January.
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    Cited by:

    1. Duan, Qinglin & Warren Liao, T., 2013. "Optimization of replenishment policies for decentralized and centralized capacitated supply chains under various demands," International Journal of Production Economics, Elsevier, vol. 142(1), pages 194-204.


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