Near-Optimal Echelon-Stock (R, nQ) Policies in Multistage Serial Systems

@article{Chen1998NearOptimalE,
  title={Near-Optimal Echelon-Stock (R, nQ) Policies in Multistage Serial Systems},
  author={Fangruo Chen and Yu-Sheng Zheng},
  journal={Operations Research},
  year={1998},
  volume={46},
  pages={592-602}
}
We study echelon-stock (R, nQ) policies in a multistage, serial inventory system with compound Poisson demand. We provide a simple method for determining near-optimal control parameters. This is achieved in two steps. First, we establish lower and upper bounds on the cost function by overand under-charging a penalty cost to each upstream stage for holding inadequate stock. Second, we minimize the bounds, which are simple, separable functions of the control parameters, to obtain heuristic… CONTINUE READING