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A tri-level optimization model for inventory control with uncertain demand and lead time

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  • Rahdar, Mohammad
  • Wang, Lizhi
  • Hu, Guiping

Abstract

We propose an inventory control model for an uncapacitated warehouse in a manufacturing facility under demand and lead time uncertainty. The objective is to make ordering decisions to minimize the total system cost. We introduce a two-stage tri-level optimization model with a rolling horizon to address the uncertain demand and lead time regardless of their underlying distributions. In addition, an exact algorithm is designed to solve the model. We compare this model in a case study with three decision-making strategies: optimistic, moderate, and pessimistic. Our computational results suggest that the performances of these models are either consistently inferior or highly sensitive to cost parameters (such as holding cost and shortage cost), whereas the new tri-level optimization model almost always results in the lowest total cost in all parameter settings.

Suggested Citation

  • Rahdar, Mohammad & Wang, Lizhi & Hu, Guiping, 2018. "A tri-level optimization model for inventory control with uncertain demand and lead time," International Journal of Production Economics, Elsevier, vol. 195(C), pages 96-105.
    • Handle: RePEc:eee:proeco:v:195:y:2018:i:c:p:96-105
    DOI: 10.1016/j.ijpe.2017.10.011
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    Cited by:

    1. Sasan Harifi & Madjid Khalilian & Javad Mohammadzadeh & Sadoullah Ebrahimnejad, 2021. "Optimization in solving inventory control problem using nature inspired Emperor Penguins Colony algorithm," Journal of Intelligent Manufacturing, Springer, vol. 32(5), pages 1361-1375, June.
    2. Dipak Barman & Gour Chandra Mahata, 2024. "A periodic review inventory system when received items are of imperfect quality under two supply mode," OPSEARCH, Springer;Operational Research Society of India, vol. 61(3), pages 1582-1617, September.
    3. Sobhani, A. & Wahab, M.I.M. & Jaber, M.Y., 2019. "The effect of working environment aspects on a vendor–buyer inventory model," International Journal of Production Economics, Elsevier, vol. 208(C), pages 171-183.
    4. Zhang, Ting & Su, Yina & Wang, Ningning, 2023. "Product quality improvement under retailer-direct financing: Effects of attitudes toward extreme weather," International Journal of Production Economics, Elsevier, vol. 257(C).

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