Browsing by Subject "Inventory control"

Now showing 1 - 20 of 29

Open Access
Age-based vs. stock level control policies for a perishable inventory system
(2001) Tekin, E.; Gürler Ü.; Berk, E.
In this study, we investigate the impact of modified lotsize-reorder control policy for perishables which bases replenishment decisions on both the inventory level and the remaining lifetimes of items in stock. We derive the expressions for the key operating characteristics of a lost sales perishable inventory model, operating under the proposed age-based policy, and examine the sensitivity of the optimal policy parameters with respect to various system parameters. We compare the performance of the suggested policy to that of the classical (Q,r) type policy through a numerical study over a wide range of system parameters. Our findings indicate that the age-based policy is superior to the stock level policy for slow moving perishable inventory systems with high service levels.
Open Access
Analysis of a decentralized supply chain under partial cooperation
(2005) Güllü, R.; Van Houtum G. J.; Sargut F. Z.; Erkip, N.
In this article, we analyze a decentralized supply chain consisting of a supplier and two independent retailers. In each order cycle, retailers place their orders at the supplier to minimize inventory-related expected costs at the end of their respective response times. There are two types of lead times involved. At the end of the supplier lead time, retailers are given an opportunity to readjust their initial orders (without changing the total order size), so that both retailers can improve their expected costs at the end of respective retailer lead times (the time it takes for items to be shipped from the supplier to the retailers). Because of the possibility of cooperation at the end of supplier lead time, each retailer will consider the other's order-up-to level in making the ordering decision. Under mild conditions, we prove the existence of a unique Nash equilibrium for the retailer order-up-to levels, and show that they can be obtained by solving a set of newsboy-like equations. We also present computational analysis that provides valuable managerial insight for design and operation of decentralized systems under the possibility of partial cooperation.
Open Access
A beam search-based algorithm and evaluation of scheduling approaches for fexible manufacturing systems
(Taylor & Francis, 1998) Sabuncuoglu İ.; Karabuk, S.
This paper presents a new algorithm for the flexible manufacturing system (FMS) scheduling problem. The proposed algorithm is a heuristic based on filtered beam search. It considers finite buffer capacity, routing and sequence flexibilities and generates machine and automated guided vehicle (AGV) schedules for a given scheduling period. A new deadlock resolution mechanism is also developed as an integral part of the proposed algorithm. The performance of the algorithm is compared with several machine and AGV dispatching rules using mean flow time, mean tardiness and makespan criteria. It is also used to examine the effects of scheduling factors (i.e., machine and AGV load levels, routing and sequence flexibilities, etc.) on the system performance. The results indicate thai the proposed scheduling algorithm yields considerable improvements in system performance over dispatching rules under a wide variety of experimental conditions. © 1998 "IIE".
Open Access
Computationally efficient optimization of stock pooling and allocation levels for two-demand-classes under general lead time distributions
(Taylor and Francis Ltd., 2016) Vicil, Oğuzhan; Jackson, Peter
In this article we develop a procedure for estimating service levels (fill rates) and for optimizing stock and threshold levels in a two-demand-class model managed based on a lot-for-lot replenishment policy and a static threshold allocation policy. We assume that the priority demand classes exhibit mutually independent, stationary, Poisson demand processes and non-zero order lead times that are independent and identically distributed. A key feature of the optimization routine is that it requires computation of the stationary distribution only once. There are two approaches extant in the literature for estimating the stationary distribution of the stock level process: a so-called single-cycle approach and an embedded Markov chain approach. Both approaches rely on constant lead times. We propose a third approach based on a Continuous-Time Markov Chain (CTMC) approach, solving it exactly for the case of exponentially distributed lead times. We prove that if the independence assumption of the embedded Markov chain approach is true, then the CTMC approach is exact for general lead time distributions as well. We evaluate all three approaches for a spectrum of lead time distributions and conclude that, although the independence assumption does not hold, both the CTMC and embedded Markov chain approaches perform well, dominating the single-cycle approach. The advantages of the CTMC approach are that it is several orders of magnitude less computationally complex than the embedded Markov chain approach and it can be extended in a straightforward fashion to three demand classes.
Open Access
A continuous review replenishment-disposal policy for an inventory system with autonomous supply and fixed disposal costs
(Elsevier, 2008) Pinçe, Ç.; Gürler, Ü.; Berk, E.
In this study, we analyze an inventory system facing stochastic external demands and an autonomous supply (independent return flow) in the presence of fixed disposal costs and positive lead times under a continuous review replenishment-disposal policy. We derive the analytical expressions of the operating characteristics of the system; and, construct the objective function to minimize the total expected costs of ordering, holding, purchasing and disposal per unit time subject to a fill rate constraint. An extensive numerical analysis is conducted to study the sensitivity of the policy parameters and the benefit of employing a policy which allows for disposal of excess stock in this setting. We model the net demand process as the superposition of normally distributed external demand and inflows, which is expressed as a Brownian motion process. Our findings indicate that the disposal option results in considerable savings even (i) in the presence of non-zero fixed disposal costs, (ii) large actual demand rates with high return ratios (resulting in small net demands) and (iii) for moderate return ratios with high demand variability.
Open Access
Dynamic lot sizing with multiple suppliers, backlogging and quantity discounts
(Elsevier Ltd, 2017) Ghaniabadi, M.; Mazinani, A.
This paper studies the dynamic lot sizing problem with supplier selection, backlogging and quantity discounts. Two known discount types are considered separately, incremental and all-units quantity discounts. Mixed integer linear programming (MILP) formulations are presented for each case and solved using a commercial optimization software. In order to timely solve the problem, a recursive formulation and its efficient implementation are introduced for each case which result in an optimal and a near optimal solution for incremental and all-units quantity discount cases, respectively. Finally, the execution times of the MILP models and forward dynamic programming models obtained from the recursive formulations are presented and compared. The results demonstrate the efficiency of the dynamic programming models, as they can solve even large-sized instances quite timely. © 2017
Open Access
A dynamic rationing policy for continuous-review inventory systems
(Elsevier, 2010) Fadıloǧlu, M. M.; Bulut, Ö.
Stock rationing is an inventory policy that allows differential treatment of customer classes without using separate inventories. In this paper, we propose a dynamic rationing policy for continuous-review inventory systems, which utilizes the information on the status of the outstanding replenishment orders. For both backordering and lost sales environments, we conduct simulation studies to compare the performance of the dynamic policy with the static critical level and the common stock policies and quantify the gain obtained. We propose two new bounds on the optimum dynamic rationing policy that enables us to tell how much of the potential gain the proposed dynamic policy realizes. We discuss the conditions under which stock rationing - both dynamic and static - is beneficial and assess the value of the dynamic policy.
Open Access
Effect of discrete batch WIP transfer on the efficiency of production lines
(Taylor & Francis, 1993) Erel, E.
In this paper, the effect of discrete batch transfer of WIP between workstations on the efficiency of asynchronous production lines is analysed via a simulation model. The processing times are assumed to be random variables distributed according to specific distribution functions. The WIP transfer design problem involves determining the number of containers to allocate to each buffer location and the container capacity. Interesting and valuable information for practitioners has been obtained. It is found that loss in capacity occurs in the first few stations. Another finding is that an important portion of the lost capacity can be regained by allocating two containers to each buffer location, and if it is impossible to assign two containers to each location, then no single-container location should be adjacent to another single-container location.
Open Access
End-of-life inventory management problem: new results and insights
(2020-09) Özyörük, Emin
We consider a manufacturer who controls the inventory of spare parts in the end-of-life phase and takes one of three actions at each period: (1) place an order, (2) use existing inventory, or (3) stop holding inventory and use an outside/alternative source. Two examples of this source are discounts for a new generation product and delegating operations. The novelty of our study is allowing multiple orders while using strategies pertinent to the end-of-life phase. Demand is described by a non-homogeneous Poisson process, and the decision to stop holding inventory is described by a stopping time. After formulating this problem as an optimal stopping problem with additional decisions and presenting its dynamic programming algorithm, we use martingale theory to facilitate the calculation of the value function. Comparison with benchmark models and sensitivity analysis show the value of our approach and generate several managerial insights. Next, in a more special environment with a single order and a deterministic time to stop holding inventory, we present structural properties and analytical insights. The results include the optimality of (s, S) policy, and the relation between S and the time to stop holding inventory. Finally, we tackle the issue of selecting the intensity function by allowing it to be a stochastic process. The demand process can be constructed by using a Poisson random measure and an intensity process being measurable with respect to the Skorokhod topology. We show the necessary properties of this process including Laplace functional, strong Markov property and its compensated random measure. In case the intensity process is unobservable, we construct a non-linear filter process and reduce the problem to one with complete observation.
Open Access
The general behavior of pull production systems: the allocation problems
(Elsevier, 1999) Kırkavak, N.; Dinçer, C.
The design of tandem production systems has been well studied in the literature with the primary focus being on how to improve their e ciency. Considering the large costs associated, a slight improvement in e ciency can lead to very signi®cant savings over its life. Division of work and allocation of bu er capacities between workstations are two critical design problems that have attracted the attention of many researchers. In this study, ®rst an understanding into how the system works is to be provided. Except for the integration of two allocation problems, the basic model utilized here is essentially the same as the previous studies. Theoretical results that characterize the dynamics of these systems may also provide some heuristic support in the analysis of large-scale pull production systems. Ó 1999 Elsevier Science B.V. All rights reserved.
Open Access
A goal programming approach to mixed-model assembly line balancing problem
(Elsevier, 1997) Gokcen, H.; Erel, E.
In this paper, a binary goal programming model for the mixed-model assembly line balancing (ALB) problem is developed. The model is based on the concepts developed by Patterson and Albracht [1] and the model of Deckro and Rangachari [2] developed for the single-model ALB problem. The proposed model provides a considerable amount of flexibility to the decision maker since several conflicting goals can be simultaneously considered.
Open Access
Intraday dynamics of stock market returns and volatility
(Elsevier BV, 2006) Selçuk, F.; Gençay, R.
This paper provides new empirical evidence for intraday scaling behavior of stock market returns utilizing a 5 min stock market index (the Dow Jones Industrial Average) from the New York Stock Exchange. It is shown that the return series has a multifractal nature during the day. In addition, we show that after a financial "earthquake", aftershocks in the market follow a power law, analogous to Omori's law. Our findings indicate that the moments of the return distribution scale nonlinearly across time scales and accordingly, volatility scaling is nonlinear under such a data generating mechanism. © 2006 Elsevier B.V. All rights reserved.
Open Access
Inventory control under substitutable demand: A stochastic game application
(John Wiley & Sons, 2002) Avsşr, Z. M.; Baykal-Gürsoy, M.
Substitutable product inventory problem is analyzed using the concepts of stochastic game theory. It is assumed that there are two substitutable products that are sold by different retailers and the demand for each product is random. Game theoretic nature of this problem is the result of substitution between products. Since retailers compete for the substitutable demand, ordering decision of each retailer depends on the ordering decision of the other retailer. Under the discounted payoff criterion, this problem is formulated as a two‐person nonzero‐sum stochastic game. In the case of linear ordering cost, it is shown that there exists a Nash equilibrium characterized by a pair of stationary base stock strategies for the infinite horizon problem. This is the unique Nash equilibrium within the class of stationary base stock strategies.
Open Access
An inventory model for recyclable goods with a disposal option
(2002-09) Çerağ, Pinçe
Open Access
Inventory performance with pooling: evidence from mergers and acquisitions
(Elsevier, 2015) Çömez-Dolgan, N.; Tanyeri B.
Theoretical studies show that compared to decentralized inventory management, (i) pooling inventories for different demand sources decreases the optimal safety stock, which in turn decreases inventory costs and (ii) the decrease in stock is related to the correlation between the different demand sources and variabilities of demands. Mergers and acquisitions (M&A) provide a business context to investigate the effects of correlation and variability of the merging firms' demands on potential improvements in inventory performance through inventory pooling. While merging firms may not fully centralize their inventory decisions, the coordination of inventory and supply chain decisions may result in synergies. Using firm-level data for 270 same-industry mergers carried out in U.S. between 1981 and 2009, we find that the inventory turnover of bidder and target firms improves (relative to firms in their industry) following the successful completion of mergers. The improvement in turnover is especially pronounced in deals where the demand of bidder and target firms are negatively correlated prior to the merger. Our results provide novel empirical support for the predictions of theoretical models on inventory economies in M&A.
Open Access
An inventory problem with two randomly available suppliers
(Institute for Operations Research and the Management Sciences, 1997) Gürler, Ü.; Parlar, M.
This paper considers a stochastic inventory model in which supply availability is subject to random fluctuations that may arise due to machine breakdowns, strikes, embargoes, etc. It is assumed that the inventory manager deals with two suppliers who may be either individually ON (available) or OFF (unavailable). Each supplier's availability is modeled as a semi-Markov (alternating renewal) process. We assume that the durations of the ON periods for the two suppliers are distributed as Erlang random variables. The OFF periods for each supplier have a general distribution. In analogy with queuing notation, we call this an Es1[Es2]/G1[G2] system. Since the resulting stochastic process is non-Markovian, we employ the "method of stages" to transform the process into a Markovian one, albeit at the cost of enlarging the state space. We identify the regenerative cycles of the inventory level process and use the renewal reward theorem to form the long-run average cost objective function. Finite time transition functions for the semi-Markov process are computed numerically using a direct method of solving a system of integral equations representing these functions. A detailed numerical example is presented for the E2[E2]/M[M] case. Analytic solutions are obtained for the particular case of "large" (asymptotic) order quantity, in which case the objective function assumes a very simple form that can be used to analyze the optimality conditions. The paper concludes with the discussion of an alternative inventory policy for modeling the random supply availability problem.
Open Access
Joint inventory and constant price decisions for a continuous review system
(Emerald Group, 2012) Çomez, N.; Kiessling, T.
Purpose: The purpose of this paper is to study joint inventory and pricing strategy for a continuous inventory review system. While dynamic pricing decisions are often studied in the literature along with inventory management, the authors' aim in this study is to obtain a single long-run optimal price; also to gain insight about how to obtain the optimal price and inventory control variables simultaneously and then the benefits of joint optimization of the inventory and pricing decisions over the sequential optimization policy often followed in practice. Design/methodology/approach: A general (R;Q) policy system with fixed cost of ordering is modelled and then the case where unsatisfied demand is lost is studied. General forms of both the additive and multiplicative demand models are used to obtain structural results. Findings: By showing optimality conditions on the price and inventory decision variables, two algorithms on how to obtain optimal decision variables, one for additive and another for multiplicative demand-price model are provided. Through extensive numerical analyses, the potential profit increases are reported if the price and inventory problem are solved simultaneously instead of sequentially. In addition, the sensitivities of optimal decision variables to system parameters are revealed. Practical implications: Although there are several studies in the literature investigating emergency price change models, they use arbitrary exogenous prices menus. However, the value of a price change can be better appreciated if the long-run price is optimal for the system. Originality/value: Very few researchers have investigated constant price and inventory optimization, and while there are several past studies demonstrating the benefits of dynamic pricing over a static one, there still are not many findings on the benefit of joint price and inventory optimization. © Emerald Group Publishing Limited.
Open Access
A multi-family dynamic lot sizing problem with coordinated replenishments: a heuristic procedure
(Taylor & Francis, 1993) Mercan, H. M.; Erenguc, S. S.
Consider a manufacturing environment where multiple items are produced. These products are grouped into families due to their similarities in design and manufacturing. It pays off to coordinate the manufacture of products in a given family because preparing the facility for producing a family of products involves a major family setup. In addition each individual product in a given family may require a relatively minor setup. The objective is to determine the product lot sizes, over a finite planning horizon, that will minimize the total relevant cost, subject to demand and capacity constraints. In this paper we present an effective heuristic procedure for this problem. Computational results for the heuristic procedure are also reported. Our computational experience leads us to conclude that the heuristic procedure may be of considerable value as a decision making aid to production planners in a real-world setting.
Open Access
Multi-item quick response system with budget constraint
(2012) Serel, D. A.
Quick response mechanisms based on effective use of up-to-date demand information help retailers to reduce their inventory management costs. We formulate a single-period inventory model for multiple products with dependent (multivariate normal) demand distributions and a given overall procurement budget. After placing orders based on an initial demand forecast, new market information is gathered and demand forecast is updated. Using this more accurate second forecast, the retailer decides the total stocking level for the selling season. The second order is based on an improved demand forecast, but it also involves a higher unit supply cost. To determine the optimal ordering policy, we use a computational procedure that entails solving capacitated multi-item newsboy problems embedded within a dynamic programming model. Various numerical examples illustrate the effects of demand variability and financial constraint on the optimal policy. It is found that existence of a budget constraint may lead to an increase in the initial order size. It is also observed that as the budget available decreases, the products with more predictable demand make up a larger share of the procurement expenditure.
Open Access
A note on "continuous review perishable inventory systems: models and heuristics"
(2003) Gürler, Ü.; Özkaya, B. Y.
In a recent paper, Lian and Liu (2001) consider a continuous review perishable inventory model with renewal arrivals, batch demands and zero lead times. However, the main analytical result they provide holds only for some special cases such as Poisson arrivals with exponential interarrival times. In this note we generalize Theorem 1 of Lian and Liu (2001) for the case where the arrivals follow an arbitrary renewal process.