A new algorithm and a new heuristic for serial supply systems

Authors:
Guillermo Gallego;ÖZalp ÖZer
Affiliations:
Department of Industrial Engineering and Operations Research, 326, Mudd Building, Columbia University, USA;Department of Management Science and Engineering, Stanford University, USA
Venue:
Operations Research Letters
Year:
2005

Citing 6
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Abstract

We present a new dynamic programming formulation for the stochastic multi-stage serial inventory system based on the cost of sub-system with fewer stages. A heuristic based on judiciously selected common downstream holding costs requires solving one newsvendor problem per stage. A closed-form approximate upper bound allows for accurate sensitivity analysis.