A stochastic program based lower bound for assemble-to-order inventory systems

Martin I. Reiman; Qiong Wang

doi:10.1016/j.orl.2011.12.001

A stochastic program based lower bound for assemble-to-order inventory systems

Martin I. Reiman, Qiong Wang

Research output: Contribution to journal › Article › peer-review

Abstract

In this paper we introduce a multi-stage stochastic program that provides a lower bound on the long-run average inventory cost of a general class of assemble-to-order (ATO) inventory systems. The stochastic program also motivates a replenishment policy for these systems. Our lower bound generalizes a previous result of Doru et al. (2010) [3] for systems with identical component replenishment lead times to those with general deterministic lead times. We provide a set of sufficient conditions under which our replenishment policy, coupled with an allocation policy, attains the lower bound (and is hence optimal). We show that these sufficient conditions hold for two examples, a single product system and a special case of the generalized W model.

Original language	English (US)
Pages (from-to)	89-95
Number of pages	7
Journal	Operations Research Letters
Volume	40
Issue number	2
DOIs	https://doi.org/10.1016/j.orl.2011.12.001
State	Published - Mar 1 2012
Externally published	Yes

Keywords

Assemble-to-order (ATO)
Inventory
Multi-dimensional newsvendor model
Optimal policy
Stochastic program

ASJC Scopus subject areas

Software
Management Science and Operations Research
Industrial and Manufacturing Engineering
Applied Mathematics

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10.1016/j.orl.2011.12.001

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AB - In this paper we introduce a multi-stage stochastic program that provides a lower bound on the long-run average inventory cost of a general class of assemble-to-order (ATO) inventory systems. The stochastic program also motivates a replenishment policy for these systems. Our lower bound generalizes a previous result of Doru et al. (2010) [3] for systems with identical component replenishment lead times to those with general deterministic lead times. We provide a set of sufficient conditions under which our replenishment policy, coupled with an allocation policy, attains the lower bound (and is hence optimal). We show that these sufficient conditions hold for two examples, a single product system and a special case of the generalized W model.

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A stochastic program based lower bound for assemble-to-order inventory systems

Abstract

Keywords

ASJC Scopus subject areas

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