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Optimal and System Myopic Policies for Multi-Echelon Production/Inventory Assembly Systems

Author

Listed:
  • Leroy B. Schwarz

    (University of Rochester)

  • Linus Schrage

    (University of California, Los Angeles)

Abstract

In this paper optimal and near optimal policies are proposed for multi-echelon production/inventory assembly systems under continuous review with constant demand over an infinite planning horizon. Costs at each stage consist of a fixed charge per order or production setup plus a linear holding cost on "echelon" inventory. The objective is minimization of average cost per unit time. The major results of this paper are: a mathematically simple, often optimal, "system myopic" solution, a lower bound on the closeness to optimality of this solution, and a branch and bound algorithm which usually finds the optimal solution quickly.

Suggested Citation

  • Leroy B. Schwarz & Linus Schrage, 1975. "Optimal and System Myopic Policies for Multi-Echelon Production/Inventory Assembly Systems," Management Science, INFORMS, vol. 21(11), pages 1285-1294, July.
    • Handle: RePEc:inm:ormnsc:v:21:y:1975:i:11:p:1285-1294
    DOI: 10.1287/mnsc.21.11.1285
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    Cited by:

    1. Lee, Dong Joo & Jeong, In-Jae, 2010. "A distributed coordination for a single warehouse-multiple retailer problem under private information," International Journal of Production Economics, Elsevier, vol. 125(1), pages 190-199, May.
    2. Erenguc, S. Selcuk & Simpson, N. C. & Vakharia, Asoo J., 1999. "Integrated production/distribution planning in supply chains: An invited review," European Journal of Operational Research, Elsevier, vol. 115(2), pages 219-236, June.
    3. Vroblefski, Mark & Ramesh, R. & Zionts, Stanley, 2000. "Efficient lot-sizing under a differential transportation cost structure for serially distributed warehouses," European Journal of Operational Research, Elsevier, vol. 127(3), pages 574-593, December.
    4. Bogaschewsky, Ronald W. & Buscher, Udo D. & Lindner, Gerd, 2001. "Optimizing multi-stage production with constant lot size and varying number of unequal sized batches," Omega, Elsevier, vol. 29(2), pages 183-191, April.
    5. Jeong, In-Jae, 2011. "A dynamic model for the optimization of decoupling point and production planning in a supply chain," International Journal of Production Economics, Elsevier, vol. 131(2), pages 561-567, June.
    6. Chu, Chi-Leung & Leon, V. Jorge, 2008. "Power-of-two single-warehouse multi-buyer inventory coordination with private information," International Journal of Production Economics, Elsevier, vol. 111(2), pages 562-574, February.
    7. Adeinat, Hamza & Ventura, Jose A., 2018. "Integrated pricing and supplier selection in a two-stage supply chain," International Journal of Production Economics, Elsevier, vol. 201(C), pages 193-202.
    8. Grubbstrom, Robert W., 1995. "Modelling production opportunities -- an historical overview," International Journal of Production Economics, Elsevier, vol. 41(1-3), pages 1-14, October.
    9. Adeinat, Hamza & Pazhani, Subramanian & Mendoza, Abraham & Ventura, Jose A., 2022. "Coordination of pricing and inventory replenishment decisions in a supply chain with multiple geographically dispersed retailers," International Journal of Production Economics, Elsevier, vol. 248(C).
    10. Kim, DaeSoo, 1999. "Optimal two-stage lot sizing and inventory batching policies," International Journal of Production Economics, Elsevier, vol. 58(3), pages 221-234, January.
    11. Pundoor, Guruprasad & Chen, Zhi-Long, 2009. "Joint cyclic production and delivery scheduling in a two-stage supply chain," International Journal of Production Economics, Elsevier, vol. 119(1), pages 55-74, May.
    12. Mendoza, Abraham & Ventura, José A., 2010. "A serial inventory system with supplier selection and order quantity allocation," European Journal of Operational Research, Elsevier, vol. 207(3), pages 1304-1315, December.
    13. Chao, Gary H., 2013. "Production and availability policies through the Markov Decision Process and myopic methods for contractual and selective orders," European Journal of Operational Research, Elsevier, vol. 225(3), pages 383-392.
    14. Simpson, N.C., 2007. "Central versus local multiple stage inventory planning: An analysis of solutions," European Journal of Operational Research, Elsevier, vol. 181(1), pages 127-138, August.
    15. Hong, Jae-Dong, 1997. "Optimal production cycles, procurement schedules, and joint investment in an imperfect production system," European Journal of Operational Research, Elsevier, vol. 100(3), pages 413-428, August.
    16. Boissière, J. & Frein, Y. & Rapine, C., 2008. "Lot-sizing in a serial distribution system with capacitated in-system production flow," International Journal of Production Economics, Elsevier, vol. 112(1), pages 483-494, March.
    17. Li, Xiuhui & Wang, Qinan, 2007. "Coordination mechanisms of supply chain systems," European Journal of Operational Research, Elsevier, vol. 179(1), pages 1-16, May.

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