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Heuristic and Exact Evaluation of Two-Echelon Inventory Systems

Sigurdardottir, Gudborg Nanna LU (2022) In Bachelor's Theses in Mathematicas Sciences MASK11 20221
Mathematical Statistics
Abstract
The main theme of this project is inventory control with stochastic demand. In this thesis, we consider a two-echelon inventory system that consists of one central warehouse and N retail stores. Customer demands at the retailers follow independent Poisson demand processes and each customer only demands one unit. Customer demands which are not satisfied directly from stock on hand are assumed to backordered, i.e., no lost sales exist. All transportation times are assumed to be constant. Replenishment, at the warehouse and at each retailer,
is made according to so-called order-up-to-S policies (also denoted as (S − 1, S)-policies). The first main goal is to derive an expected system cost function which consists of inventory holding costs... (More)
The main theme of this project is inventory control with stochastic demand. In this thesis, we consider a two-echelon inventory system that consists of one central warehouse and N retail stores. Customer demands at the retailers follow independent Poisson demand processes and each customer only demands one unit. Customer demands which are not satisfied directly from stock on hand are assumed to backordered, i.e., no lost sales exist. All transportation times are assumed to be constant. Replenishment, at the warehouse and at each retailer,
is made according to so-called order-up-to-S policies (also denoted as (S − 1, S)-policies). The first main goal is to derive an expected system cost function which consists of inventory holding costs and backorder costs. Secondly, we will optimize this cost function with respect to the base-stock levels Si, i = 0, . . . , N , where Si represents the base-stock-level at retailer
i (index 0 is for the warehouse).
We will first consider an exact method to optimize the expected system cost function. In this exact method, the lead-times for the retail stores are stochastic due to possible delays when replenishing from the central warehouse. However, in practice, it is common to use an approximate method where the stochastic lead-times for the retailers are replaced by the corresponding mean values. Here, we will investigate the robustness of this approximate method in terms of changes in system parameters. (Less)
Popular Abstract
The essence of inventory control is to decide when we should order new items and how much we should order. With an efficient inventory control model, companies can maximize their profits and avoid stocking up unnecessary amounts of goods in warehouses.
Please use this url to cite or link to this publication:
author
Sigurdardottir, Gudborg Nanna LU
supervisor
organization
alternative title
Exakt och approximativ analys av lagersystem i två nivåer
course
MASK11 20221
year
type
M2 - Bachelor Degree
subject
keywords
Inventory Control, Single-echelon model, Two-Echelon model
publication/series
Bachelor's Theses in Mathematicas Sciences
report number
LUNFMS-4064-2022
ISSN
1654-6229
other publication id
2022:K9
language
English
id
9094159
date added to LUP
2022-06-30 10:18:38
date last changed
2022-07-20 13:22:57
@misc{9094159,
  abstract     = {{The main theme of this project is inventory control with stochastic demand. In this thesis, we consider a two-echelon inventory system that consists of one central warehouse and N retail stores. Customer demands at the retailers follow independent Poisson demand processes and each customer only demands one unit. Customer demands which are not satisfied directly from stock on hand are assumed to backordered, i.e., no lost sales exist. All transportation times are assumed to be constant. Replenishment, at the warehouse and at each retailer,
is made according to so-called order-up-to-S policies (also denoted as (S − 1, S)-policies). The first main goal is to derive an expected system cost function which consists of inventory holding costs and backorder costs. Secondly, we will optimize this cost function with respect to the base-stock levels Si, i = 0, . . . , N , where Si represents the base-stock-level at retailer
i (index 0 is for the warehouse).
We will first consider an exact method to optimize the expected system cost function. In this exact method, the lead-times for the retail stores are stochastic due to possible delays when replenishing from the central warehouse. However, in practice, it is common to use an approximate method where the stochastic lead-times for the retailers are replaced by the corresponding mean values. Here, we will investigate the robustness of this approximate method in terms of changes in system parameters.}},
  author       = {{Sigurdardottir, Gudborg Nanna}},
  issn         = {{1654-6229}},
  language     = {{eng}},
  note         = {{Student Paper}},
  series       = {{Bachelor's Theses in Mathematicas Sciences}},
  title        = {{Heuristic and Exact Evaluation of Two-Echelon Inventory Systems}},
  year         = {{2022}},
}