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Approximations for non-stationary stochastic lot-sizing under (s,Q)-type policy

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  • Ma, Xiyuan
  • Rossi, Roberto
  • Archibald, Thomas Welsh

Abstract

This paper addresses the single-item single-stocking location non-stationary stochastic lot-sizing problem under a reorder point – order quantity control strategy. The reorder points and order quantities are chosen at the beginning of the planning horizon. The reorder points are allowed to vary with time and we consider order quantities either to be a series of time-dependent constants or a fixed value; this leads to two variants of the policy: the (st,Qt) and the (st,Q) policies, respectively. For both policies, we present stochastic dynamic programs (SDP) to determine optimal policy parameters and introduce mixed integer non-linear programming (MINLP) heuristics that leverage piecewise-linear approximations of the cost function. Numerical experiments demonstrate that our solution method efficiently computes near-optimal parameters for a broad class of problem instances.

Suggested Citation

  • Ma, Xiyuan & Rossi, Roberto & Archibald, Thomas Welsh, 2022. "Approximations for non-stationary stochastic lot-sizing under (s,Q)-type policy," European Journal of Operational Research, Elsevier, vol. 298(2), pages 573-584.
    • Handle: RePEc:eee:ejores:v:298:y:2022:i:2:p:573-584
    DOI: 10.1016/j.ejor.2021.06.013
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    References listed on IDEAS

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