A characterization of optimal base‐stock levels for a multistage serial supply chain |
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Authors: | Peter Berling Victor Martínez‐de‐Albéniz |
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Institution: | 1. Department of Industrial Management and Logistics, Lund University and Department of Accounting and Logistics, Linnaeus University, Sweden;2. Production, Technology and Operations Management Department, IESE Business SchoolUniversity of Navarra |
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Abstract: | In this article, we present a multistage model to optimize inventory control decisions under stochastic demand and continuous review. We first formulate the general problem for continuous stages and use a decomposition solution approach: since it is never optimal to let orders cross, the general problem can be broken into a set of single‐unit subproblems that can be solved in a sequential fashion. These subproblems are optimal control problems for which a differential equation must be solved. This can be done easily by recursively identifying coefficients and performing a line search. The methodology is then extended to a discrete number of stages and allows us to compute the optimal solution in an efficient manner, with a competitive complexity. © 2016 Wiley Periodicals, Inc. Naval Research Logistics 63: 32–46, 2016 |
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Keywords: | unit decomposition multi‐echelon inventory |
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