Article ID: | iaor20031754 |
Country: | Netherlands |
Volume: | 141 |
Issue: | 3 |
Start Page Number: | 587 |
End Page Number: | 595 |
Publication Date: | Sep 2002 |
Journal: | European Journal of Operational Research |
Authors: | Melchiors Philip |
Keywords: | programming: markov decision |
In this paper we consider the stochastic joint replenishment problem. We coordinate the replenishment of an inventory with several items, where the fixed cost of a replenishment consists of a major order cost for each order and a minor order cost for each item participating in the order. The literature has focused on two kinds of policies: can-order policies and periodic replenishment policies. Generally speaking the can-order policy performs better when the major ordering cost is relatively low, and the periodic replenishment policies better when the major ordering cost is relatively high. We present a new method for calculating can-order policies, which dominates existing methods on examples where the can-order policy performs better than the periodic replenishment policies. The method is based on a compensation approach, where an item placing an order receives a compensation from other items benefitting from the order opportunity.