A dynamic joint replenishment policy with auto-correlated demand

A dynamic joint replenishment policy with auto-correlated demand

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Article ID: iaor20061890
Country: Netherlands
Volume: 165
Issue: 3
Start Page Number: 729
End Page Number: 747
Publication Date: Sep 2005
Journal: European Journal of Operational Research
Authors: ,
Keywords: heuristics
Abstract:

We consider a joint replenishment problem where the product demands are auto-correlated but independent of each other. A dynamic periodic review policy is developed, and its parameters are determined by a heuristic which aims at minimizing the total inventory cost, which includes the holding cost, the setup cost and the shortage cost. The heuristic updates the review interval and the target inventory level of every product at each review point based on the current inventory status and the past demand data. A simulation model is developed to compare the performance of this proposed policy with an existing periodic review policy. The results show that the proposed policy has consistently achieved significant saving in all the different experimental scenarios.

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