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Note: A Simple Heuristic for Serial Inventory Systems with Fixed Order Costs

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  • Kevin H. Shang

    (Fuqua School of Business, Duke University, Durham, North Carolina 27708)

Abstract

We propose a heuristic for finding base order quantities for stochastic inventory models. The heuristic includes two steps. The first clusters the stages according to cost parameters. The second solves a single-stage problem for each cluster with the original problem data. In a numerical study, we show that the heuristic is near optimal.

Suggested Citation

  • Kevin H. Shang, 2008. "Note: A Simple Heuristic for Serial Inventory Systems with Fixed Order Costs," Operations Research, INFORMS, vol. 56(4), pages 1039-1043, August.
    • Handle: RePEc:inm:oropre:v:56:y:2008:i:4:p:1039-1043
    DOI: 10.1287/opre.1080.0547
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    References listed on IDEAS

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    1. Fangruo Chen, 1998. "Stationary Policies in Multiechelon Inventory Systems with Deterministic Demand and Backlogging," Operations Research, INFORMS, vol. 46(3-supplem), pages 26-34, June.
    2. Fangruo Chen & Yu-Sheng Zheng, 1998. "Near-Optimal Echelon-Stock (R, nQ) Policies in Multistage Serial Systems," Operations Research, INFORMS, vol. 46(4), pages 592-602, August.
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    5. Fangruo Chen, 2000. "Optimal Policies for Multi-Echelon Inventory Problems with Batch Ordering," Operations Research, INFORMS, vol. 48(3), pages 376-389, June.
    6. Kevin H. Shang & Jing-Sheng Song, 2007. "Serial Supply Chains with Economies of Scale: Bounds and Approximations," Operations Research, INFORMS, vol. 55(5), pages 843-853, October.
    7. Robin Roundy, 1985. "98%-Effective Integer-Ratio Lot-Sizing for One-Warehouse Multi-Retailer Systems," Management Science, INFORMS, vol. 31(11), pages 1416-1430, November.
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    Cited by:

    1. de Kok, Ton & Grob, Christopher & Laumanns, Marco & Minner, Stefan & Rambau, Jörg & Schade, Konrad, 2018. "A typology and literature review on stochastic multi-echelon inventory models," European Journal of Operational Research, Elsevier, vol. 269(3), pages 955-983.
    2. Gautier Stauffer, 2012. "Using the economical order quantity formula for inventory control in one‐warehouse multiretailer systems," Naval Research Logistics (NRL), John Wiley & Sons, vol. 59(3‐4), pages 285-297, April.
    3. Kevin H. Shang & Sean X. Zhou, 2010. "Optimal and Heuristic Echelon ( r, nQ, T ) Policies in Serial Inventory Systems with Fixed Costs," Operations Research, INFORMS, vol. 58(2), pages 414-427, April.
    4. Agrawal, Narendra & Smith, Stephen A., 2019. "Optimal inventory management using retail prepacks," European Journal of Operational Research, Elsevier, vol. 274(2), pages 531-544.
    5. Kevin H. Shang & Jing-Sheng Song & Paul H. Zipkin, 2009. "Coordination Mechanisms in Decentralized Serial Inventory Systems with Batch Ordering," Management Science, INFORMS, vol. 55(4), pages 685-695, April.
    6. Kevin H. Shang & Sean X. Zhou & Geert-Jan van Houtum, 2010. "Improving Supply Chain Performance: Real-Time Demand Information and Flexible Deliveries," Manufacturing & Service Operations Management, INFORMS, vol. 12(3), pages 430-448, May.
    7. Ming Hu & Yi Yang, 2014. "Modified Echelon ( r, Q ) Policies with Guaranteed Performance Bounds for Stochastic Serial Inventory Systems," Operations Research, INFORMS, vol. 62(4), pages 812-828, August.
    8. Yang, Lei & Yang, Jian & Yu, Gang & Zhang, Hanqin, 2011. "Near-optimal (r,Q) policies for a two-stage serial inventory system with Poisson demand," International Journal of Production Economics, Elsevier, vol. 133(2), pages 728-735, October.

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