A Two-Echelon Inventory Optimization Model with Demand Time Window Considerations

  • Authors:
  • Wikrom Jaruphongsa;Sila Çetinkaya;Chung-Yee Lee

  • Affiliations:
  • Department of Industrial and Systems Engineering, National University of Singapore, Singapore;Department of Industrial Engineering, Texas A&M University, College Station, TX, USA;Department of Industrial Engineering and Engineering Management, The Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong

  • Venue:
  • Journal of Global Optimization
  • Year:
  • 2004

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Abstract

This paper studies a two-echelon dynamic lot-sizing model with demand time windows and early and late delivery penalties. The problem is motivated by third-party logistics and vendor managed inventory applications in the computer industry where delivery time windows are typically specified under a time definite delivery contract. Studying the optimality properties of the problem, the paper provides polynomial time algorithms that require O(T3) computational complexity if backlogging is not allowed and O(T5) computational complexity if backlogging is allowed.