Worst-case analysis of (R,Q) policies in a two-stage serial inventory system with deterministic demand and backlogging

Authors:
Fangruo Chen
Affiliations:
Graduate School of Business, Columbia University, New York, NY 10027, USA
Venue:
Operations Research Letters
Year:
1999

Citing 4
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Simple power-of-two policies are close to optimal in a general class of production/distribution networks with general joint setup costs

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Stationary Policies in Multiechelon Inventory Systems with Deterministic Demand and Backlogging

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Abstract

This paper considers a two-stage inventory system where customer demand arises at stage 1, stage 1 replenishes its inventory from stage 2, and stage 2 orders from an outside supplier with unlimited stock. Customer demand is assumed to arrive continuously at a constant rate and is backlogged when stage 1 runs out of stock. There are economies of scale in transferring inventories from the outside supplier to stage 2 or from stage 2 to stage 1. We show that (R,Q) policies are 86%-effective. Numerical examples are provided to further demonstrate the cost effectiveness of (R,Q) policies.