A new algorithm for one-warehouse multi-retailer systems under stationary nested policy

This study aims at optimally coordinating inventory among all the partners in a supply chain system with a central warehouse and multiple local retailers so as to minimize the average total costs. After reviewing the literature, we found that no study proposes an efficient solution approach that guarantees to solve the optimal solution for the one-warehouse multi-retailer (OWMR) lot-sizing problem. The solution approaches in the literature share a common problem, namely, they do not have insights into the characteristics of the optimal-cost curve. Therefore, this study first focuses on performing a full theoretical analysis on the characteristics of the optimal-cost curve. Then, by utilizing our theoretical results, we derive an effective search algorithm that is able to solve the optimal solution for the OWMR lot-sizing problem under stationary nested policy. Based on our random experiments, we demonstrate that our search algorithm out-performs the other heuristics.