Newsvendor Bounds and Heuristics for Optimal Policy of Serial Inventory/ Distribution System with Regular and Expedited Shippings
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Date: 04-11-2006
Start Time:
1:00pm
End Time: 2:00pm
Speaker: Xiuli Chao, North Carolina State University
Location: Mudd 303
Abstract
We consider an N-stage serial production/distribution system with stationary demand. There are two transportation modes between stages: the regular and expedited shippings. The optimal inventory policy for this system is known to be echelon base-stock policy, which can be computed through minimizing 2N nested convex functions recursively. To identity the key determinants of the optimal policy, we develop simple newsvendor type of lower and upper bounds for the control parameters, as well as simple near optimal heuristics. Numerical results show that the heuristic performs very well.
This is a joint work with doctoral student Sean Zhou.
Bio
Xiuli Chao got his doctoral degree from IEOR Department of Columbia University in 1989, and he is currently a professor at North Carolina State University. His research interest includes queueing theory, stochastic scheduling, financial engineering, inventory theory, and supply chain management. He is the coauthor of two books, Operations Scheduling with Applications in Manufacturing and Services (McGraw-Hill, 1998), and Queueing Networks: Customers, Signals, and Product Form Solutions (Wiley, 1999). He received the 1998 Erlang Prize from the Applied Probability Society of INFORMS, and the 2005 David Baker Distinguished Research Award from the Institute of Industrial Engineers (IIE).