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Optimal periodic flexible policies for two-stage serial supply chains

Liu, Fang; Gavirneni, Srinagesh


Srinagesh Gavirneni


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.


Liu, F., & Gavirneni, S. (2018). Optimal periodic flexible policies for two-stage serial supply chains. European Journal of Operational Research, 268(1), 148-160.

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
Keywords Information Systems and Management; Management Science and Operations Research; Modeling and Simulation; General Computer Science; Industrial and Manufacturing Engineering
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