Robust economic order quantity models

Robust economic order quantity models

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Article ID: iaor19991591
Country: Netherlands
Volume: 100
Issue: 3
Start Page Number: 482
End Page Number: 493
Publication Date: Aug 1997
Journal: European Journal of Operational Research
Authors:
Keywords: economic order
Abstract:

In this paper, we study the classical economic order quantity model under significant uncertainties. In particular, the problem under consideration is the economic order quantity model with the input data of the demand rate, the order cost, and the holding cost rate being uncertain. A robustness approach based on scenario characterization of the input data is adopted to describe the uncertainties. The aim of the approach is to find an inventory policy that performs well under all realizable input data scenarios. An efficient linear time algorithm is devised to find the robust decisions. Analytical results are obtained for the case where input data are defined in continuous intervals. Comparisons on performances between the robust decisions and the stochastic optimization decisions are conducted. The results demonstrate the advantages of robustness approach.

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