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A Lower Bound and an Efficient Heuristic for Multistage Multiproduct Distribution Systems

Author

Listed:
  • Paul Iyogun

    (School of Business and Economics, Wilfrid Laurier University, Waterloo, Ontario, Canada N2L 3C5)

  • Derek Atkins

    (Faculty of Commerce and Business Administration, The University of British Columbia, Vancouver, BC, Canada V6T 1Y8)

Abstract

This paper concerns lot-sizing in a multistage and multifacility pure distribution network. A facility at the end of the distribution network experiences a deterministic and continuous demand. Each facility has an echelon holding cost rate for each item it distributes, and a facility-dependent set up cost. In this paper an algorithm is presented of complexity 0(rd log r) where r is the number of end facilities and d is the maximum depth of the distribution system. The algorithm exploits a lower bound obtained by decomposing the distribution network into facilities-in-series problems. Using a set up cost allocation procedure, the maximum of the continuous solution of the decomposed problem is obtained. This maximizing solution provides the lower bound which is used for solving the distribution problem. This gives a power-of-two heuristic with a worst case performance no more than 2% above optimal.

Suggested Citation

  • Paul Iyogun & Derek Atkins, 1993. "A Lower Bound and an Efficient Heuristic for Multistage Multiproduct Distribution Systems," Management Science, INFORMS, vol. 39(2), pages 204-217, February.
    • Handle: RePEc:inm:ormnsc:v:39:y:1993:i:2:p:204-217
    DOI: 10.1287/mnsc.39.2.204
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    Citations

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    Cited by:

    1. 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.
    2. Qinan Wang, 2001. "Coordinating Independent Buyers in a Distribution System to Increase a Vendor's Profits," Manufacturing & Service Operations Management, INFORMS, vol. 3(4), pages 337-348, May.
    3. Wang, Qinan & Chay, Yiowmin & Wu, Zhang, 2011. "Streamlining inventory flows with time discounts to improve the profits of a decentralized supply chain," International Journal of Production Economics, Elsevier, vol. 132(2), pages 230-239, August.
    4. Qu, Wendy W. & Bookbinder, James H. & Iyogun, Paul, 1999. "An integrated inventory-transportation system with modified periodic policy for multiple products," European Journal of Operational Research, Elsevier, vol. 115(2), pages 254-269, June.
    5. A. Kimms, 1997. "Demand shuffle—A method for multilevel proportional lot sizing and scheduling," Naval Research Logistics (NRL), John Wiley & Sons, vol. 44(4), pages 319-340, June.
    6. Kimms, Alf & Drexl, Andreas, 1996. "Multi-level lot sizing: A literature survey," Manuskripte aus den Instituten für Betriebswirtschaftslehre der Universität Kiel 405, Christian-Albrechts-Universität zu Kiel, Institut für Betriebswirtschaftslehre.

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