Rolling‐horizon replenishment: Policies and performance analysis |
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| Authors: | Zhaotong Lian Liming Liu Stuart X Zhu |
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| Institution: | 1. Department of Accounting and Management Information, Faculty of Business Administration, University of Macau, Macau, China;2. Department of Logistics and Maritime Studies, Faculty of Business, Hong Kong Polytechnic University, Kowloon, Hong Kong;3. Department of Operations, Faculty of Economics and Business, University of Groningen, Groningen, The Netherlands |
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| Abstract: | We consider a rolling‐horizon (RH) replenishment modeling framework under which a buyer can update demand information and inventory status, modify order quantities committed previously, place an advanced order for a new period at the end of the RH, and move along in time seamlessly. We show that the optimal order policy for the two‐period RH problem is a dual‐threshold type for updating period(s) plus a base‐stock type for the advanced order. We provide analytical formulas and algorithms to compute the optimal thresholds and the optimal base‐stock level exactly. With our analytical results and numerical procedures, we demonstrate the significant value of RH replenishment in matching supplies to demands more closely. We also show that with RH updating (flexibility), the value of additional demand information beyond the RH diminishes quickly. © 2010 Wiley Periodicals, Inc. Naval Research Logistics, 2010 |
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| Keywords: | rolling horizon quantity supply contract policy structure optimization |
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