A characterization of optimal base-stock levels for a multistage serial supply chain

Peter Berling, Victor Martínez-De-Albéniz

Research output: Contribution to journalArticlepeer-review

Abstract

In this article, we present a multistage model to optimize inventory control decisions under stochastic demand and continuous review. We first formulate the general problem for continuous stages and use a decomposition solution approach: since it is never optimal to let orders cross, the general problem can be broken into a set of single-unit subproblems that can be solved in a sequential fashion. These subproblems are optimal control problems for which a differential equation must be solved. This can be done easily by recursively identifying coefficients and performing a line search. The methodology is then extended to a discrete number of stages and allows us to compute the optimal solution in an efficient manner, with a competitive complexity.

Original languageEnglish
Pages (from-to)32-46
Number of pages15
JournalNaval Research Logistics
Volume63
Issue number1
DOIs
Publication statusPublished - 2016 Feb 1

Subject classification (UKÄ)

  • Transport Systems and Logistics

Free keywords

  • inventory
  • multi-echelon
  • unit decomposition

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