Replenishment planning for stochastic inventory systems with shortage cost

R. Rossi, S. Prestwich, S. Armagan Tarim, B. Hnich

Research output: Chapter in Book/Report/Conference proceedingChapter (peer-reviewed)peer-review

Abstract

One of the most important policies adopted in inventory control is the (R,S) policy (also known as the "replenishment cycle" policy). Under the non-stationary demand assumption the (R,S) policy takes the form (R ,S) where R denotes the length of the n replenishment cycle, and S the corresponding order-up-to-level. Such a policy provides an effective means of damping planning instability and coping with demand uncertainty. In this paper we develop a CP approach able to compute optimal (R,S) policy parameters under stochastic demand, ordering, holding and shortage costs. The convexity of the cost-function is exploited during the search to compute bounds. We use the optimal solutions to analyze the quality of the solutions provided by an approximate MIP approach that exploits a piecewise linear approximation for the cost function.
Original languageEnglish
Title of host publicationIntegration of AI and OR Techniques in Constraint Programming for Combinatorial Optimization Problems
Subtitle of host publication4th International Conference, CPAIOR 2007, Brussels, Belgium, May 23-26, 2007. Proceedings
Editors Pascal Van Hentenryck, Laurence Wolsey
PublisherSpringer-Verlag GmbH
Pages229-243
Number of pages15
Volume4510 LNCS
ISBN (Print)978-3-540-72396-7
DOIs
Publication statusPublished - 23 Jun 2007

Publication series

NameLecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics)
PublisherSpringer Berlin / Heidelberg
ISSN (Print)0302-9743
ISSN (Electronic)1611-3349

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