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Optimal Continuous Review Policies for Two Product Inventory Systems with Joint Setup Costs

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  • Edward Ignall

    (Columbia University)

Abstract

Minimum average cost ordering policies for continuously reviewed two product inventory systems with joint setup costs are sought. Disappointly, the optimal policy, even in a simple symmetric case, is not always simple: For some values of cost and demand parameters, a policy that would be difficult to implement is optimal. Markov Renewal Programming is used to find the region in parameter space where a given policy is optimal.

Suggested Citation

  • Edward Ignall, 1969. "Optimal Continuous Review Policies for Two Product Inventory Systems with Joint Setup Costs," Management Science, INFORMS, vol. 15(5), pages 278-283, January.
    • Handle: RePEc:inm:ormnsc:v:15:y:1969:i:5:p:278-283
    DOI: 10.1287/mnsc.15.5.278
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    Cited by:

    1. Dellaert, Nico & van de Poel, Erik, 1996. "Global inventory control in an academic hospital," International Journal of Production Economics, Elsevier, vol. 46(1), pages 277-284, December.
    2. Wang, Ziping & Yao, Dong-Qing & Huang, Peiqing, 2007. "A new location-inventory policy with reverse logistics applied to B2C e-markets of China," International Journal of Production Economics, Elsevier, vol. 107(2), pages 350-363, June.
    3. Eric Porras Musalem & Rommert Dekker, 2003. "Controlling Inventories in a Supply Chain," Tinbergen Institute Discussion Papers 03-012/4, Tinbergen Institute.
    4. Liu, Liming & Yuan, Xue-Ming, 2000. "Coordinated replenishments in inventory systems with correlated demands," European Journal of Operational Research, Elsevier, vol. 123(3), pages 490-503, June.
    5. Park, Hyungjun & Choi, Dong Gu & Min, Daiki, 2023. "Adaptive inventory replenishment using structured reinforcement learning by exploiting a policy structure," International Journal of Production Economics, Elsevier, vol. 266(C).
    6. Rosenfield, Donald B., 1947-, 1985. "Optimal ordering regions under joint replenishmnet," Working papers 1661-85., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    7. Yu Zhang & Vidyadhar Kulkarni, 2018. "Automated Teller Machine Replenishment Policies with Submodular Costs," Manufacturing & Service Operations Management, INFORMS, vol. 20(3), pages 517-530, July.
    8. Padilla Tinoco, Silvia Valeria & Creemers, Stefan & Boute, Robert N., 2017. "Collaborative shipping under different cost-sharing agreements," European Journal of Operational Research, Elsevier, vol. 263(3), pages 827-837.
    9. Larsen, Christian, 2007. "The Q(s,S) control policy for the joint replenishment problem extended to the case of correlation among item-demands," CORAL Working Papers L-2007-01, University of Aarhus, Aarhus School of Business, Department of Business Studies.
    10. Stefanny Ramirez & Laurence H. Brandenburg & Dario Bauso, 2023. "Coordinated Replenishment Game and Learning Under Time Dependency and Uncertainty of the Parameters," Dynamic Games and Applications, Springer, vol. 13(1), pages 326-352, March.
    11. Kouki, Chaaben & Babai, M. Zied & Jemai, Zied & Minner, Stefan, 2016. "A coordinated multi-item inventory system for perishables with random lifetime," International Journal of Production Economics, Elsevier, vol. 181(PA), pages 226-237.
    12. Tsai, Chieh-Yuan & Tsai, Chi-Yang & Huang, Po-Wen, 2009. "An association clustering algorithm for can-order policies in the joint replenishment problem," International Journal of Production Economics, Elsevier, vol. 117(1), pages 30-41, January.
    13. Musalem, Eric Porras & Dekker, Rommert, 2005. "Controlling inventories in a supply chain: A case study," International Journal of Production Economics, Elsevier, vol. 93(1), pages 179-188, January.
    14. Lee, Loo Hay & Chew, Ek Peng, 2005. "A dynamic joint replenishment policy with auto-correlated demand," European Journal of Operational Research, Elsevier, vol. 165(3), pages 729-747, September.
    15. Kiesmüller, G.P., 2010. "Multi-item inventory control with full truckloads: A comparison of aggregate and individual order triggering," European Journal of Operational Research, Elsevier, vol. 200(1), pages 54-62, January.
    16. S G Johansen & P Melchiors, 2003. "Can-order policy for the periodic-review joint replenishment problem," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 54(3), pages 283-290, March.
    17. Timmer, Judith & Chessa, Michela & Boucherie, Richard J., 2013. "Cooperation and game-theoretic cost allocation in stochastic inventory models with continuous review," European Journal of Operational Research, Elsevier, vol. 231(3), pages 567-576.
    18. James Flynn, 2001. "Selecting review periods for a coordinated multi‐item inventory model with staggered deliveries," Naval Research Logistics (NRL), John Wiley & Sons, vol. 48(5), pages 430-449, August.
    19. Melchiors, Philip, 2002. "Calculating can-order policies for the joint replenishment problem by the compensation approach," European Journal of Operational Research, Elsevier, vol. 141(3), pages 587-595, September.
    20. Creemers, Stefan & Boute, Robert, 2022. "The joint replenishment problem: Optimal policy and exact evaluation method," European Journal of Operational Research, Elsevier, vol. 302(3), pages 1175-1188.
    21. Banu Yüksel Özkaya & Ülkü Gürler & Emre Berk, 2006. "The stochastic joint replenishment problem: A new policy, analysis, and insights," Naval Research Logistics (NRL), John Wiley & Sons, vol. 53(6), pages 525-546, September.
    22. Larsen, Christian, 2009. "The Q(s,S) control policy for the joint replenishment problem extended to the case of correlation among item-demands," International Journal of Production Economics, Elsevier, vol. 118(1), pages 292-297, March.
    23. Nielsen, Christina & Larsen, Christian, 2005. "An analytical study of the Q(s,S) policy applied to the joint replenishment problem," European Journal of Operational Research, Elsevier, vol. 163(3), pages 721-732, June.

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