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Optimal Power-of-Two Replenishment Strategies in Capacitated General Production/Distribution Networks

Author

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  • A. Federgruen

    (Graduate School of Business, Columbia University, New York, New York 10027)

  • Yu-Sheng Zheng

    (Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104)

Abstract

In this paper we develop a model for a capacitated production/distribution network of general (but acyclic) topology with a general bill of materials, as considered in MRP (Material Requirement Planning) or DRP (Distribution Requirement Planning) systems. This model assumes stationary, deterministic demand rates and a standard stationary cost structure; it is a generalization of the uncapacitated model treated in the seminal papers of Maxwell and Muckstadt (1985) and Roundy (1986). The capacity constraints consist of bounds on the frequency with which individual items can or need to be replenished. We derive a pair of simple and efficient algorithms capable of determining an optimal power-of-two policy. These algorithms consist of a limited number of maximum flow computations in networks closely related to the production/distribution network. The complexity of these algorithms, even when applied to the uncapacitated model, compares favorably with that of the existing alternative solution methods.

Suggested Citation

  • A. Federgruen & Yu-Sheng Zheng, 1993. "Optimal Power-of-Two Replenishment Strategies in Capacitated General Production/Distribution Networks," Management Science, INFORMS, vol. 39(6), pages 710-727, June.
    • Handle: RePEc:inm:ormnsc:v:39:y:1993:i:6:p:710-727
    DOI: 10.1287/mnsc.39.6.710
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    Citations

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    Cited by:

    1. Boissiere, J. & Frein, Y. & Rapine, C., 2008. "Optimal stationary policies in a 3-stage serial production-distribution logistic chain facing constant and continuous demand," European Journal of Operational Research, Elsevier, vol. 186(2), pages 608-619, April.
    2. Chung-Piaw Teo & Dimitris Bertsimas, 2001. "Multistage Lot Sizing Problems via Randomized Rounding," Operations Research, INFORMS, vol. 49(4), pages 599-608, August.
    3. Sox, Charles R. & Jackson, Peter L. & Bowman, Alan & Muckstadt, John A., 1999. "A review of the stochastic lot scheduling problem," International Journal of Production Economics, Elsevier, vol. 62(3), pages 181-200, September.
    4. 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.
    5. 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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