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Technical Note---On Optimal Policies for Inventory Systems with Batch Ordering

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  • Woonghee Tim Huh

    (Sauder School of Business, University of British Columbia, Vancouver, British Columbia V6T 1Z4, Canada)

  • Ganesh Janakiraman

    (Naveen Jindal School of Management, The University of Texas at Dallas, Richardson, Texas 75080)

Abstract

We study a periodically reviewed multiechelon inventory system in series such that order quantities at every stage have to be multiples of a given stage-specific batch size. The batch sizes are nested in the sense that the batch size for every stage is an integer multiple of the batch size for its downstream stage. The problem is that of determining the policy that minimizes the expected discounted sum of costs over a finite horizon. The result is that an echelon ( R, nQ ) policy is optimal when demands are independent across periods or, more generally, Markov-modulated. We also comment on algorithmic implications of our result and on extensions.

Suggested Citation

  • Woonghee Tim Huh & Ganesh Janakiraman, 2012. "Technical Note---On Optimal Policies for Inventory Systems with Batch Ordering," Operations Research, INFORMS, vol. 60(4), pages 797-802, August.
    • Handle: RePEc:inm:oropre:v:60:y:2012:i:4:p:797-802
    DOI: 10.1287/opre.1120.1060
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    References listed on IDEAS

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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.
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    3. Osman Alp & Woonghee Tim Huh & Tarkan Tan, 2014. "Inventory Control with Multiple Setup Costs," Manufacturing & Service Operations Management, INFORMS, vol. 16(1), pages 89-103, February.
    4. Fernando Bernstein & Yang Li & Kevin Shang, 2016. "A Simple Heuristic for Joint Inventory and Pricing Models with Lead Time and Backorders," Management Science, INFORMS, vol. 62(8), pages 2358-2373, August.
    5. Zhu, Han & Liu, Xing & Chen, Youhua (Frank), 2015. "Effective inventory control policies with a minimum order quantity and batch ordering," International Journal of Production Economics, Elsevier, vol. 168(C), pages 21-30.
    6. Cong Shi & Huanan Zhang & Xiuli Chao & Retsef Levi, 2014. "Approximation algorithms for capacitated stochastic inventory systems with setup costs," Naval Research Logistics (NRL), John Wiley & Sons, vol. 61(4), pages 304-319, June.
    7. Ying Wei, 2020. "Optimizing constant pricing and inventory decisions for a periodic review system with batch ordering," Annals of Operations Research, Springer, vol. 291(1), pages 939-957, August.
    8. Yi Yang & Youhua (Frank) Chen & Yun Zhou, 2014. "Coordinating Inventory Control and Pricing Strategies Under Batch Ordering," Operations Research, INFORMS, vol. 62(1), pages 25-37, February.

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