The Impact of Modeling on Robust Inventory Management Under Demand Uncertainty

Date

2016-04-01

Author

Solyali, Oguz
Cordeau, Jean-Francois
Laporte, Gilbert

Metadata

Show full item record

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Item Usage Stats

192
views

0
downloads

This study considers a basic inventory management problem with nonzero fixed order costs under interval demand uncertainty. The existing robust formulations obtained by applying well-known robust optimization methodologies become computationally intractable for large problem instances due to the presence of binary variables. This study resolves this intractability issue by proposing a new robust formulation that is shown to be solvable in polynomial time when the initial inventory is zero or negative. Because of the computational efficiency of the new robust formulation, it is implemented on a folding-horizon basis, leading to a new heuristic for the problem. The computational results reveal that the new heuristic is not only superior to the other formulations regarding the computing time needed, but also outperforms the existing robust formulations in terms of the actual cost savings on the larger instances. They also show that the actual cost savings yielded by the new heuristic are close to a lower bound on the optimal expected cost.

Subject Keywords

Integer programming, Lot sizing, Inventory management, Robust optimization

URI

https://hdl.handle.net/11511/66297

Journal

MANAGEMENT SCIENCE

DOI

https://doi.org/10.1287/mnsc.2015.2183

Collections

Economics and Administrative Sciences, Article

Suggestions

OpenMETU
Core

The inventory routing problem with deterministic order-up-to level inventory policies Pınar, Özlem; Süral, Haldun; Department of Industrial Engineering (2005) This study is concerned with the inventory routing problem with deterministic, dynamic demand and order-up-to level inventory policy. The problem mainly arises in the supply chain management context. It incorporates simultaneous decision making on inventory management and vehicle routing with the purpose of gaining advantage from coordinated decisions. An integrated mathematical model that represents the features of the problem is presented. Due to the magnitude of the model, lagrangean relaxation solution ...
Robust Inventory Routing Under Demand Uncertainty Solyali, Oguz; Cordeau, Jean-Francois; Laporte, Gilbert (2012-08-01) This paper introduces a robust inventory routing problem where a supplier distributes a single product to multiple customers facing dynamic uncertain demands over a finite discrete time horizon. The probability distribution of the uncertain demand at each customer is not fully specified. The only available information is that these demands are independent and symmetric random variables that can take some value from their support interval. The supplier is responsible for the inventory management of its custo...
A multi-phase heuristic for the production routing problem Solyali, Oguz; Süral, Haldun (2017-11-01) This study considers the production routing problem where a plant produces and distributes a single item to multiple retailers over a multi-period time horizon. The problem is to decide on when and how much to produce and stock at the plant, when and how much to serve and stock at each retailer, and vehicle routes for shipments such that the sum of fixed production setup cost, variable production cost, distribution cost, and inventory carrying cost at the plant and retailers is minimized. A multi-phase heur...
A two-echelon inventory model with stock-dependent demand and variable holding cost for deteriorating items Pervin, Magfura; null, null; Kumar Roy, Sankar; Wilhelm Weber, Gerhard (American Institute of Mathematical Sciences (AIMS), 2017) In this study, we develop an inventory model for deteriorating items with stock dependent demand rate. Shortages are allowed to this model and when stock on hand is zero, then the retailer offers a price discount to customers who are willing to back-order their demands. Here, the supplier as well as the retailer adopt the trade credit policy for their customers in order to promote the market competition. The retailer can earn revenue and interest after the customer pays for the amount of purchasing cost to ...
Analysis of an inventory system under supply uncertainty Gullu, R; Onol, E; Erkip, N (Elsevier BV, 1999-03-20) In this paper, we analyze a periodic review, single-item inventory model under supply uncertainty. The objective is to minimize expected holding and backorder costs over a finite planning horizon under the supply constraints. The uncertainty in supply is modeled using a three-point probability mass function. The supply is either completely available, partially available, or the supply is unavailable. Machine breakdowns, shortages in the capacity of the supplier, strikes, etc., are possible causes of uncerta...

Citation Formats

O. Solyali, J.-F. Cordeau, and G. Laporte, “The Impact of Modeling on Robust Inventory Management Under Demand Uncertainty,” MANAGEMENT SCIENCE, pp. 1188–1201, 2016, Accessed: 00, 2020. [Online]. Available: https://hdl.handle.net/11511/66297.