Degeneracy in inventory models

In order‐quantity reorder‐point formulations for inventory items where backordering is allowed, some of the more common ways to prevent excessive stockouts in an optimal solution are to impose either a cost per unit short, a cost per stockout occasion, or a target fill rate. We show that these popular formulations, both exact and approximate, can become “degenerate” even with quite plausible parameters. By degeneracy we mean any situation in which the formulation either cannot be solved, leads to nonsensical “optimal” solutions, or becomes equivalent to something substantially simpler. We explain the reasons for the degeneracies, yielding new insight into these models, and we provide practical advice for inventory managers. © 2002 Wiley Periodicals, Inc. Naval Research Logistics 49: 686–705, 2002; Published online in Wiley InterScience (www.interscience.wiley.com). DOI 10.1002/nav.10037     

More military base closure? Considering the alternatives*

Despite multiple base closing rounds, the United States Department of Defense still has excess base capacity, and thus President Trump and high-level Defense Department officials are calling for more base closure through the Base Realignment and Closure (BRAC) process. However, another BRAC may not be the optimal solution, because simple base closure is not an efficient way to reduce surplus base capacity. Thus, Defense Department officials should consider other methods to reduce surplus capacity, including reduction in base size, leasing excess base property, or transferring it to another government agency for a variety of alternative uses. The surplus capacity issue also offers an opportunity to DOD to reassess base utilization, to update base requirements with current and future force structure. While BRAC focuses on American military bases, the process and alternatives also have international applications.     

On compounded bivariate poisson distributions

A unified treatment is given for a class of discrete distributions derived by compounding a bivariate Poisson with a bivariate discrete or continuous distribution. Using generating functions a number of interesting results are obtained for probabilities, moments, cumulants, factorial moments, and factorial cumulants. Conditional distributions and regression functions are also examined. Five illustrative examples are presented in detail. © 1994 John Wiley & Sons, Inc.     

Tests for transient means in simulated time series

We present a family of tests to detect the presence of a transient mean in a simulation process. These tests compare variance estimators from different parts of a simulation run, and are based on the methods of batch means and standardized time series. Our tests can be viewed as natural generalizations of some previously published work. We also include a power analysis of the new tests, as well as some illustrative examples. © 1994 John Wiley & Sons, Inc.     

Note: On the set-union knapsack problem

We consider a generalization of the 0-1 knapsack problem called the set-union knapsack problem (SKP). In the SKP, each item is a set of elements, each item has a nonnegative value, and each element has a nonnegative weight. The total weight of a collection of items is given by the total weight of the elements in the union of the items' sets. This problem has applications to data-base partitioning and to machine loading in flexible manufacturing systems. We show that the SKP remains NP-hard, even in very restricted cases. We present an exact, dynamic programming algorithm for the SKP and show sufficient conditions for it to run in polynomial time. © 1994 John Wiley & Sons, Inc.     

An analytic basis for decision support in negotiations

Mediators increase the effectiveness of negotiation processes. The art of mediation includes interpersonal skills, ability to convince, and proficiency in argumentation. The science of mediation represents an analytical approach to problem solving, a systematic analysis of the process, of players' positions, and of their goals, aspirations, and concessions. Analytical tools for mediation can be used by mediators, but these tools can also support negotiators in their analysis, verification of their positions, and choices. The knowledge of effective and safe alternatives, of sets of compromises, and the knowledge of the possible outcomes of concessions may be used to develop an effective strategy and to increase a negotiator's bargaining power. Models to analyze alternatives, to verify concessions made by the opponents, to determine effective alternatives, and to search for solutions that yield mutual gains, to aggregate opponents' proposals, to look for coalition members, and to simulate some of the actions of a mediator are discussed in the article.     

An inventory model of incentives for on-time delivery in just-in-time purchasing contracts

This article formulates an analytic model of just-in-time purchasing contracts and compares the minimum cost solution with the cost attainable through vertical integration. The models use standard inventory theory cost parameters and decision variables. The results quantify the increase in cost of buying an item rather than making it. Optimal incentives are characterized when JIT purchasing contracts are used. When JIT purchasing is implemented, buffer inventories are typically reduced. This inventory reduction makes on-time delivery critical to the buyer; yet timeliness is controlled by the supplier. As an incentive to provide on-time delivery, the buyer offers the supplier a bonus for on-time delivery. The supplier chooses a flow time allowance based upon the bonus offered. First- and second-order conditions are characterized in general, and examples are provided for exponentially and uniformly distributed flow times. The delivery timeliness obtainable in a vertically integrated firm is determined and compared with timeliness obtainable between separate firms. This comparison indicates that buyers who choose to purchase materials from a separate firm are more likely to experience late deliveries. The relationship between the value of the bonus and the proportion of on-time deliveries is also considered. The bonus required to achieve the same probability of on-time delivery as under vertical integration is also determined. © 1993 John Wiley & Sons, Inc.     

Component part stocking policies

This article presents research designed to aid firms who assemble many components into a final product. We assume that purchase quantities are fixed, and that all parts and components are assembled at one stage in a short time. Demand for the final product is represented by a stationary independent and identically distributed random variable; and unmet demand is backordered. Ordering is done on a periodic review basis. We develop infinite horizon, approximate expected cost, and expected service level functions, and we present an algorithm for finding approximately minimum cost reorder points for each part subject to a service level constraint. Extensive results on the accuracy of the approximations are presented. Due to the size of the problem, we present only limited results on the performance of the optimization algorithm.     

See the light: Optimization of put-to-light order picking systems

Put-to-light order picking systems invert the basic logic of conventional picker-to-parts systems. Instead of successively visiting the storage positions of the stock keeping units (SKUs) when collecting picking orders, an order picker accompanies successive bins each containing multiple items of a specific SKU along a lane of subsequent orders. Whenever the picker passes an order requiring the current SKU, which is indicated by a light signal, she puts the requested number of items into the bin associated with the order. Such an order picking system is well-suited if the assortment is not overly large and all orders demand similar SKUs, so that it is mainly applied in distribution centers of brick-and-mortar retail chains. This paper evaluates four different setups of put-to-light systems, which, during operations, require the solution of different storage assignment and SKU sequencing problems. We formulate these problems, prove computational complexity, and suggest suited solution algorithms. By applying these algorithms in a comprehensive computational study, we benchmark the impact of the four different setups on picking performance. In this way, warehouse managers receive decision support on how to set up their put-to-light systems.