Optimal periodic flexible policies for two-stage serial supply chains

Liu, Fang; Gavirneni, Srinagesh

Abstract

In a two-stage serial supply chain, a periodic flexible policy (PF policy) allows the retailer to receive fixed orders that may depend on demand history in one period of the ordering cycle and order freely in other periods. Existing literature has shown that certain PF policies can significantly reduce the inefficiency in a decentralized supply chain. However, these works have mostly defined and implemented ad-hoc periodic flexible policies and have not attempted to identify the optimal periodic flexible policies. In this paper, we characterize the structure of the optimal PF policy using calculus of variations. In particular, we show that under the optimal PF policy, the retailer receives shipments either according to a state dependent capacitated policy or a state dependent order up to policy. Furthermore, we can approximate the retailer’s optimal restricted ordering function by a piecewise linear function and show numerically that this approximation is near optimal.

Citation

Liu, F., & Gavirneni, S. (2018). Optimal periodic flexible policies for two-stage serial supply chains. European Journal of Operational Research, 268(1), 148-160. https://doi.org/10.1016/j.ejor.2018.01.004

• Journal Article Type: Article
• Online Publication Date: Feb 23, 2018
• Publication Date: 2018-07
• Deposit Date: Feb 12, 2024
• Journal: European Journal of Operational Research
• Print ISSN: 0377-2217
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 268
• Issue: 1
• Pages: 148-160
• DOI: https://doi.org/10.1016/j.ejor.2018.01.004
• Keywords: Information Systems and Management; Management Science and Operations Research; Modeling and Simulation; General Computer Science; Industrial and Manufacturing Engineering
• Public URL: https://durham-repository.worktribe.com/output/2252154