Simple Newsvendor Bounds for Inventory Distribution Systems

• Main Author: Lystad, Erik D.
• Published: Georgia Institute of Technology 2007
• Subjects: Simulation; Heuristics; Inventory; Distribution systems; Supply chain management
• Online Access: http://hdl.handle.net/1853/14591

To date, closed form optimal solutions for stocking levels in arborescent multiechelon inventory systems have not been obtained. These problems exhibit the joint difficulties of requiring an allocation policy as well as a stocking policy, and the multidimensional nature of their state space makes dynamic programming formulations impractical. In this dissertation, we introduce procedures that approximate multiechelon networks with sets of single installation problems. We first use this technique to solve for base-stock levels in a distribution network with asymmetric retailers. Second, we use this technique to analyze delayed differentiation production processes and provide guidance as to when the strategy is most warranted. Third, we modify the technique to account for inventory that exhibits perishability and solve for stocking policies for distribution systems when the inventory has a fixed shelf life.