Value-based Q(s, S) policy for joint replenishments

Abstract:

We improve the previously proposed Q(s, S) policy for the stochastic joint replenishment problem. In our value-based Q(s, S) policy, item inventories are reviewed after each demand instant when the total demand since the last replenishment is close to Q. At each such review instance a new replenishment order is issued, if the expected cost of ordering immediately according to the (s, S) policy is less than the expected cost of deferring the order until the next demand or until the level Q is reached.

We use simulation to evaluate our policy. Applying the value-based Q(s, S) policy to a standard set of 12-item numerical examples from the literature, the long-run average cost of the best known solution is reduced by approximately 1%. Further examples are also investigated and in some cases for which the cost structure implies a high service level, the cost reduction exceeds 10% of the cost of the pure Q(s, S) policy.

Slides

Biography:

Anders Thorstenson is Professor and Director of CORAL (Centre for OR Applications in Logistics) at the Department of Business Studies, Aarhus School of Business, Aarhus University, Denmark. He has an M.Sc. in Industrial Engineering and a Ph.D. in Production Economics from Linköping Institute of Technology, Sweden. He has been Professor of Industrial Logistics at Luleå Technical University, Sweden, and before that Associate Professor at the Norwegian School of Logistics, Molde University College, Norway and at Linköping Institute of Technology. He has held visiting positions as Associate Professor at Aarhus University and as Professor at Aalborg University, Denmark, at the University of Wisconsin-Madison, USA, and at Hong Kong Polytechnic University. His main fields of interest are in business logistics and supply chain management, in particular production and inventory control.