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Optimal ECR Policy in Two-Depot System: Periodic Review

In: Modelling Empty Container Repositioning Logistics

Author

Listed:
  • Dong-Ping Song

    (University of Liverpool)

  • Jingxin Dong

    (Newcastle University)

Abstract

This chapter considers two depots that are facing independent supply and demand of empty containers from shippers. We seek the optimal ECR policy between two depots over a multi-period planning horizon to minimize the total expected cost consisting of empty container transferring costs between two depots, and inventory holding costs and container leasing costs at both depots. We formulate the problem as a stochastic dynamic programming model. The local properties of the value function such as the first and the second derivatives on a region-wise basis are analyzed. The region-wise properties of the value function enable us to establish the structural characteristics of the optimal ECR policy over multiple time periods. Specifically, the entire state space is divided into three control regions by two monotonic switching curves. The asymptotic behaviors of the switching curves are analyzed. The structural properties of the optimal ECR policy and the asymptotic behaviors of the switching curves are then used to construct simple near-optimal and easy-to-operate policies. Numerical examples are provided to demonstrate the analytical results.

Suggested Citation

  • Dong-Ping Song & Jingxin Dong, 2022. "Optimal ECR Policy in Two-Depot System: Periodic Review," Springer Books, in: Modelling Empty Container Repositioning Logistics, chapter 0, pages 43-72, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-93383-8_3
    DOI: 10.1007/978-3-030-93383-8_3
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