A triple (S,s,ℓ)-thresholds base-stock policy subject to uncertainty environment, returns and order cancellations

Single-sourcing lost-sales inventory systems with lead times are notoriously difficult to optimize. In this paper, we propose a new family of capped base-stock policies and provide a new perspective on constructing a practical hybrid policy combining two well-known heuristics: base-stock and constant-order policies. Each capped base-stock policy is associated with two parameters: a base-stock level and an order cap. We prove that for any fixed order cap, the capped base-stock policy converges exponentially fast in the base-stock level to a constant-order policy, providing a theoretical foundation for a phenomenon by which a capped dual-index policy converges numerically to a tailored base-surge policy recently observed in other work in a different but related dual-sourcing inventory model. As a consequence, there exists a sequence of capped base-stock policies that are asymptotically optimal as the lead time grows. We also numerically demonstrate its superior performance in general (including small lead times) by comparing it with otherwell-known heuristics.

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Networked base-stock policy for continuous-review goods distribution systems with uncertain demand

2017 21st International Conference on System Theory, Control and Computing (ICSTCC) ◽

10.1109/icstcc.2017.8107069 ◽

2017 ◽

Cited By ~ 1

Author(s):

Przemyslaw Ignaciuk

Keyword(s):

Distribution Systems ◽

Base Stock ◽

Uncertain Demand ◽

Continuous Review ◽

Base Stock Policy ◽

Stock Policy

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Analysis of lead time correlation under a base-stock policy

European Journal of Operational Research ◽

10.1016/j.ejor.2019.01.029 ◽

2019 ◽

Vol 276 (2) ◽

pp. 519-535 ◽

Cited By ~ 2

Author(s):

Tim Hellemans ◽

Robert N. Boute ◽

Benny Van Houdt

Keyword(s):

Lead Time ◽

Time Correlation ◽

Base Stock ◽

Base Stock Policy ◽

Stock Policy

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Optimization and Customer Utilities under Dynamic Lead Time Quotation in an M/M Type Base Stock System

Mathematical Problems in Engineering ◽

10.1155/2017/5805404 ◽

2017 ◽

Vol 2017 ◽

pp. 1-10 ◽

Cited By ~ 2

Author(s):

Koichi Nakade ◽

Hiroki Niwa

Keyword(s):

Waiting Time ◽

Lead Time ◽

Inventory System ◽

Base Stock ◽

Base Stock Policy ◽

Optimal Policies ◽

Optimal Dynamic ◽

System Information ◽

Lead Time Quotation ◽

Stock Policy

In a manufacturing and inventory system, information on production and order lead time helps consumers’ decision whether they receive finished products or not by considering their own impatience on waiting time. In Savaşaneril et al. (2010), the optimal dynamic lead time quotation policy in a one-stage production and inventory system with a base stock policy for maximizing the system’s profit and its properties are discussed. In this system, each arriving customer decides whether he/she enters the system based on the quoted lead time informed by the system. On the other hand, the customer’s utility may be small under the optimal quoted lead time policy because the actual lead time may be longer than the quoted lead time. We use a utility function with respect to benefit of receiving products and waiting time and propose several kinds of heuristic lead time quotation policies. These are compared with optimal policies with respect to both profits and customer’s utilities. Through numerical examples some kinds of heuristic policies have better expected utilities of customers than the optimal quoted lead time policy maximizing system’s profits.

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