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dc.contributor.author Shang, KH
dc.contributor.author Zhou, SX
dc.date.accessioned 2011-06-21T17:31:01Z
dc.date.issued 2010-03-01
dc.identifier.citation Operations Research, 2010, 58 (2), pp. 414 - 427
dc.identifier.issn 0030-364X
dc.identifier.uri http://hdl.handle.net/10161/4433
dc.description.abstract This paper studies a periodic-review, serial inventory system in which echelon (r,nQ,T) policies are implemented. Under such a policy, each stage reviews its inventory in every T period and orders according to an echelon (r,nQ,T) policy. Two types of fixed costs are considered: one is associated with each order batch Q, and the other is incurred for each inventory review. The objective is to find the policy parameters such that the average total cost per period is minimized. This paper provides a method for obtaining heuristic and optimal policy parameters. The heuristic is based on minimizing lower and upper bounds on the total cost function. These total cost bounds, which are separable functions of the policy parameters, are obtained in two steps: First, we decompose the total cost into costs associated with each stage, which include a penalty cost for holding inadequate stock. Second, we construct lower and upper bounds for the penalty cost by regulating downstream policy parameters. To find the optimal solution, we further construct cost bounds for each echelon (a subsystem that includes a stage and all of its downstream stages) by regulating holding and backorder cost parameters. The echelon lower-bound cost functions, as well as the stage cost bounds, generate bounds for the optimal solution. In a numerical study, we find that the heuristic is near optimal when the ratio of the fixed cost to the holding cost at the most downstream stage is large. We also find that changing the optimal batch sizes may not affect the optimal reorder intervals or, equivalently, the delivery schedules under some conditions. © 2010 INFORMS.
dc.format.extent 414 - 427
dc.language.iso en_US en_US
dc.relation.ispartof Operations Research
dc.relation.isversionof 10.1287/opre.1090.0734
dc.title Optimal and Heuristic Echelon (r,nQ,T) policies in serial inventory systems with fixed costs
dc.title.alternative en_US
dc.type Journal Article
dc.description.version Version of Record en_US
duke.date.pubdate 2010-4-mar en_US
duke.description.endpage 427 en_US
duke.description.issue 2 en_US
duke.description.startpage 414 en_US
duke.description.volume 58 en_US
dc.relation.journal Operations research en_US
pubs.issue 2
pubs.organisational-group /Duke
pubs.organisational-group /Duke/Fuqua School of Business
pubs.publication-status Published
pubs.volume 58
dc.identifier.eissn 1526-5463

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