A two-echelon inventory optimization model with demand time window considerations

Abstract

This paper studies a two-echelon dynamic lot-sizing model with demand time windows and early and late delivery penalties. The problem is motivated by third-party logistics and vendor managed inventory applications in the computer industry where delivery time windows are typically specified under a time definite delivery contract. Studying the optimality properties of the problem, the paper provides polynomial time algorithms that require O(T3) computational complexity if backlogging is not allowed and O(T5) computational complexity if backlogging is allowed. © 2004 Kluwer Academic Publishers.