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Title: Near-optimal (r,Q) policies for a two-stage serial inventory system with Poisson demand
Authors: Yang, L.
Yang, J.
Yu, G.
Zhang, H. 
Keywords: (r,Q) policy
Multi-echelon inventory
Stochastic demand
Issue Date: 2011
Citation: Yang, L., Yang, J., Yu, G., Zhang, H. (2011). Near-optimal (r,Q) policies for a two-stage serial inventory system with Poisson demand. International Journal of Production Economics 133 (2) : 728-735. ScholarBank@NUS Repository.
Abstract: We consider a two-stage serial inventory system whose cost structure exhibits economies of scale in both stages. In the system, stage 1 faces Poisson demand and replenishes its inventory from stage 2, and the latter stage in turn orders from an outside supplier with unlimited stock. Each shipment, either to stage 2 or to stage 1, incurs a fixed setup cost. We derive important properties for a given echelon-stock (r, Q) policy for an approximation of the problem where all states are continuous. Based on these properties, we design a simple heuristic algorithm that can be used to find a near-optimal (r, Q) policy for the original problem. Numerical examples are given to demonstrate the effectiveness of the algorithm. © 2011 Elsevier B.V. All right reserved.
Source Title: International Journal of Production Economics
ISSN: 09255273
DOI: 10.1016/j.ijpe.2011.03.030
Appears in Collections:Staff Publications

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