Echelon base-stock policies are financially sub-optimal

Authors:
Qiaohai (Joice) Hu;Matthew J. Sobel
Affiliations:
Purdue Krannert School of Management, West Lafayette, IN 47907, USA;Case Weatherhead School of Management, Cleveland, OH 44106, USA
Venue:
Operations Research Letters
Year:
2007

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Abstract

We study a Clark and Scarf multi-echelon inventory model with the objective of optimizing the expected present value of dividends. A counterexample shows that generally there is no optimal echelon base-stock policy if there are financial constraints and two or more echelons.