A two-echelon inventory optimization model with demand time window considerations

This paper studies a two-echelon dynamic lot-sizing model with demand time windows and early and late delivery penalties. The problem is motivated by third-party logistics and vendor managed inventory applications in the computer industry where delivery time windows are typically specified under a time definite delivery contract. Studying the optimality properties of the problem, the paper provides polynomial time algorithms that require O(T³) computational complexity if backlogging is not allowed and O(T³) computational complexity if backlogging is allowed.