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Title: | Approximation approaches for inventory systems with general production/Ordering cost structures | Authors: | Lu, Y Song, M Yang, Y |
Issue Date: | Mar-2018 | Source: | Production and operations management, Mar. 2018, v. 27, no. 3, p. 417-432 | Abstract: | The production/ordering cost structure is fundamental to determining an optimal inventory control policy. For example, it is well known that a base-stock policy is optimal for inventory systems with linear production costs, whereas an (s,S) policy is optimal if both linear and fixed costs exist. However, many of the cost structures that have arisen from the practice are quite complex and make the optimal policies too complicated for managers to implement. In this study, we propose several easy-to-implement and efficient heuristic policies for inventory systems with general production costs, which include multiple linear pieces and fixed costs, suggesting a wide application to many practical problems that were previously difficult to solve. We establish the worst-case performance bounds on the proposed heuristic policies by using the concept of K-approximate convexity. Our extensive numerical studies, which are designed to reflect practical inventory control applications, evaluate the performance of the heuristic policies and show that the best heuristic policy we propose performs extremely well. We also try to provide explanations for the performance of different heuristic policies. | Keywords: | Inventory control General production Ordering cost K-approximate convexity |
Publisher: | Wiley-Blackwell | Journal: | Production and operations management | ISSN: | 1059-1478 | EISSN: | 1937-5956 | DOI: | 10.1111/poms.12806 | Rights: | © 2017 Production and Operations Management Society This is the peer reviewed version of the following article: Lu, Y., Song, M., & Yang, Y. (2018). Approximation approaches for inventory systems with general production/ordering cost structures. Production and Operations Management, 27(3), 417-432, which has been published in final form at https://doi.org/10.1111/poms.12806. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation. Copyright notices must not be removed, obscured or modified. The article must be linked to Wiley’s version of record on Wiley Online Library and any embedding, framing or otherwise making available the article or pages thereof by third parties from platforms, services and websites other than Wiley Online Library must be prohibited. |
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