Fangruo Chen

Lower bounds for multi-echelon stochastic inventory systems

Coauthor(s): Yu-Sheng Zheng.

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Abstract:
We establish lower bounds on the minimum costs of managing certain production-distribution networks with setup costs at all stages and stochastic demands. These networks include serial, assembly, and one-warehouse multi-retailer systems. We obtain the bounds through novel cost-allocation schemes. We evaluate the bounds' performance for one-warehouse multi-retailer systems by comparing them with simple, heuristic policies. The bounds are quite tight for systems with a small number of retailers. We also present simplified proofs of known optimality for serial and assembly systems.

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