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Multistage Inventory Management with Expediting

Multistage Inventory Management with Expediting After reformulating Clark and Scarf's (1960) classical serial multi-echelon model so that the lead time between adjacent echelons is one week (period), the option to expedite between each resulting echelon is added. Thus, each week requires a decision to be made at each echelon on how many units to expedite in from the next upstream echelon (to be received immediately) and how many to regular order (to be received in one week), with the remainder detained (left as is). The model can be interpreted as addressing dynamic lead time management, in which the (remaining) effective lead time for each ordered unit can be dynamically reduced by expediting andor extended. Use of Clark and Scarf's (1960) idea of echelon stocks reduces a complex, multidimensional stocking problem to the analysis of a series of one-dimensional subproblems. What are called top-down base stock policies, which are readily amenable to managerial interpretation, are shown to be optimal. Myopic policies are shown to be optimal in the stationary, in1nite horizon case. The results are illustrated numerically. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Operations Research INFORMS

Multistage Inventory Management with Expediting

Operations Research , Volume 48 (6): 16 – Dec 1, 2000
16 pages

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References (26)

Publisher
INFORMS
Copyright
Copyright © INFORMS
Subject
Research Article
ISSN
0030-364X
eISSN
1526-5463
DOI
10.1287/opre.48.6.878.12399
Publisher site
See Article on Publisher Site

Abstract

After reformulating Clark and Scarf's (1960) classical serial multi-echelon model so that the lead time between adjacent echelons is one week (period), the option to expedite between each resulting echelon is added. Thus, each week requires a decision to be made at each echelon on how many units to expedite in from the next upstream echelon (to be received immediately) and how many to regular order (to be received in one week), with the remainder detained (left as is). The model can be interpreted as addressing dynamic lead time management, in which the (remaining) effective lead time for each ordered unit can be dynamically reduced by expediting andor extended. Use of Clark and Scarf's (1960) idea of echelon stocks reduces a complex, multidimensional stocking problem to the analysis of a series of one-dimensional subproblems. What are called top-down base stock policies, which are readily amenable to managerial interpretation, are shown to be optimal. Myopic policies are shown to be optimal in the stationary, in1nite horizon case. The results are illustrated numerically.

Journal

Operations ResearchINFORMS

Published: Dec 1, 2000

Keywords: Keywords : Inventory/production, multi-echelon: decomposition into sequence of one-dimensional problems ; Inventory/production, review/lead times: dynamically managed expediting ; Dynamic programming, applications: optimality of top-down base stock policies under stochastic demands

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