Allocation policies and cost approximations for multilocation inventory systems
Coauthor(s): Paul Zipkin.
Consider a central depot that supplies several locations experiencing random demands. Periodically, the depot may place an order for exogenous supply. Orders arrive after a fixed leadtime, and are then allocated among the several locations. Each allocation reaches its destination after a further delay. We consider the special case where the penalty-cost/holding-cost ratio is constant over the locations. Several approaches are given to approximate the dynamic program describing the problem. Each approach provides both a near-optimal order policy and an approximation of the optimal cost of the original problem. In addition, simple but effective allocation policies are discussed.
Source: Naval Research Logistics
Federgruen, Awi, and Paul Zipkin. "Allocation policies and cost approximations for multilocation inventory systems." Naval Research Logistics 31, no. 1 (1984): 97-129.