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Allocation policies and cost approximations for multilocation inventory systems

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  • Awi Federgruen
  • Paul Zipkin

Abstract

Consider a central depot that supplies several locations experiencing random demands. Periodically, the depot may place an order for exogenous supply. Orders arrive after a fixed leadtime, and are then allocated among the several locations. Each allocation reaches its destination after a further delay. We consider the special case where the penalty‐cost/holding‐cost ratio is constant over the locations. Several approaches are given to approximate the dynamic program describing the problem. Each approach provides both a near‐optimal order policy and an approximation of the optimal cost of the original problem. In addition, simple but effective allocation policies are discussed.

Suggested Citation

  • Awi Federgruen & Paul Zipkin, 1984. "Allocation policies and cost approximations for multilocation inventory systems," Naval Research Logistics Quarterly, John Wiley & Sons, vol. 31(1), pages 97-129, March.
    • Handle: RePEc:wly:navlog:v:31:y:1984:i:1:p:97-129
    DOI: 10.1002/nav.3800310112
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    Citations

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    Cited by:

    1. De‐bi Cao & Edward A. Silver, 2005. "A dynamic allocation heuristic for centralized safety stock," Naval Research Logistics (NRL), John Wiley & Sons, vol. 52(6), pages 513-526, September.
    2. Peter L. Jackson & John A. Muckstadt & Yuexing Li, 2019. "Multiperiod Stock Allocation via Robust Optimization," Management Science, INFORMS, vol. 65(2), pages 794-818, February.
    3. Dai, Bo & Chen, Haoxun & Li, Yuan & Zhang, Yidong & Wang, Xiaoqing & Deng, Yuming, 2023. "An alternating direction method of multipliers for optimizing (s, S) policies in a distribution system with joint replenishment volume constraints," Omega, Elsevier, vol. 116(C).
    4. F. Kleintje-Ell & G. Kiesmüller, 2015. "Cost minimising order schedules for a capacitated inventory system," Annals of Operations Research, Springer, vol. 229(1), pages 501-520, June.
    5. Huaxiao Shen & Tian Tian & Han Zhu, 2019. "A Two-Echelon Inventory System with a Minimum Order Quantity Requirement," Sustainability, MDPI, vol. 11(18), pages 1-22, September.
    6. Ralph D. Badinelli & Leroy B. Schwarz, 1988. "Backorders optimization in a one‐warehouse N‐identical retailer distribution system," Naval Research Logistics (NRL), John Wiley & Sons, vol. 35(5), pages 427-440, October.
    7. Awi Federgruen & C. Daniel Guetta & Garud Iyengar, 2018. "Two‐echelon distribution systems with random demands and storage constraints," Naval Research Logistics (NRL), John Wiley & Sons, vol. 65(8), pages 594-618, December.
    8. Johan Marklund, 2011. "Inventory control in divergent supply chains with time‐based dispatching and shipment consolidation," Naval Research Logistics (NRL), John Wiley & Sons, vol. 58(1), pages 59-71, February.
    9. Sven Axsäter, 1993. "Optimization of order‐up‐to‐s policies in two‐echelon inventory systems with periodic review," Naval Research Logistics (NRL), John Wiley & Sons, vol. 40(2), pages 245-253, March.

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