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Managing premium wines using an $$(s - 1,s)$$ ( s - 1 , s ) inventory policy: a heuristic solution approach

Author

Listed:
  • Mauricio Varas

    (Universidad del Desarrollo)

  • Franco Basso

    (Universidad Diego Portales)

  • Armin Lüer-Villagra

    (Universidad Andres Bello)

  • Alejandro Mac Cawley

    (Pontificia Universidad Católica de Chile)

  • Sergio Maturana

    (Pontificia Universidad Católica de Chile)

Abstract

Operations research models are increasingly being used to support decision making in the wine industry. However, they have not yet been used to support inventory management decisions. In this paper, we develop a heuristic procedure for managing the stock of premium wines motivated by the operations of a small export-focused winery we worked with. Following an $$(s-1,s)$$ ( s - 1 , s ) inventory policy, we assume that the decision maker aims to minimize the steady-state expected values of work in process, overage, and underage costs. The developed heuristic is as follows. First, we approximate the dynamics of the labeling process by a group scheduling policy to obtain the mean delays for each labeled product. Then, we address the problem of setting the inventory positions for the whole product portfolio by solving one newsvendor-type problem for each end-product. We provide some theoretical insights, a numerical example, and we analyze the accuracy of our procedure.

Suggested Citation

  • Mauricio Varas & Franco Basso & Armin Lüer-Villagra & Alejandro Mac Cawley & Sergio Maturana, 2019. "Managing premium wines using an $$(s - 1,s)$$ ( s - 1 , s ) inventory policy: a heuristic solution approach," Annals of Operations Research, Springer, vol. 280(1), pages 351-376, September.
    • Handle: RePEc:spr:annopr:v:280:y:2019:i:1:d:10.1007_s10479-019-03266-3
    DOI: 10.1007/s10479-019-03266-3
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