Computing optimal (R,s,S) Policy Parameters by a hybrid of branch-and-bound and stochastic dynamic programming

Andrea Visentin, Steven Prestwich, Roberto Rossi, S. Armagan Tarim

Research output: Contribution to journalArticlepeer-review

Abstract / Description of output

A well-known control policy in stochastic inventory control is the (R,s,S) policy, in which inventory is raised to an order-up-to-level S at a review instant R whenever it falls below reorder-level s. To date, little or no work has been devoted to developing approaches for computing (R,s,S) policy parameters. In this work, we introduce a hybrid approach that exploits tree search to compute optimal replenishment cycles, and stochastic dynamic programming to compute (s,S) levels for a given cycle. Up to 99.8% of the search tree is pruned by a branch-and-bound technique with bounds generated by dynamic programming. A numerical study shows that the method can solve instances of realistic size in a reasonable time.
Original languageEnglish
Pages (from-to)91-99
Number of pages9
JournalEuropean Journal of Operational Research
Volume294
Issue number1
Early online date13 Jan 2021
DOIs
Publication statusPublished - 1 Oct 2021

Keywords / Materials (for Non-textual outputs)

  • inventory
  • (R,s,S) policy
  • demand uncertainty
  • stochastic lot sizing

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