A mathematical programming-based solution method for the nonstationary inventory problem under correlated demand

Mengyuan Xiang, Roberto Rossi, Belen Martin-Barragan, S. Armagan Tarim

Research output: Contribution to journalArticlepeer-review

Abstract

This paper extends the single-item single-stocking location non stationary stochastic inventory problem to relax the assumption of independent demand. We present a mathematical programming-based solution method built upon an existing piece wise linear approximation strategy under the receding horizon control framework. Our method can be implemented by leveraging off-the-shelf mixed-integer linear programming solvers. It can tackle demand under various assumptions: the multivariate normal distribution, a collection of time-series processes, and the Martingale Model of Forecast Evolution. We compare against exact solutions obtained via stochastic dynamic programming to demonstrate that our method leads to near-optimal plans.
Original languageEnglish
JournalEuropean Journal of Operational Research
Early online date22 Apr 2022
DOIs
Publication statusE-pub ahead of print - 22 Apr 2022

Keywords

  • inventory
  • correlated demand
  • stochastic programming
  • mixed integer linear programming
  • martingale model of forecast evolution

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