A stochastic dynamic programming based heuristic for the inventory decision-making encountered in a two-echelon warehouse system

Qingwei Jiang; Hao Yin; Canrong Zhang

doi:10.1117/12.2668769

16 February 2023 A stochastic dynamic programming based heuristic for the inventory decision-making encountered in a two-echelon warehouse system

Qingwei Jiang, Hao Yin, Canrong Zhang

Author Affiliations +

Proceedings Volume 12591, Sixth International Conference on Traffic Engineering and Transportation System (ICTETS 2022); 125910P (2023) https://doi.org/10.1117/12.2668769
Event: 6th International Conference on Traffic Engineering and Transportation System (ICTETS 2022), 2022, Guangzhou, China

Abstract

The inventory control problem is a classic intelligent decision-making scenario. A good inventory policy can greatly improve the efficiency of supply chain and enhance the competitiveness of enterprises. This paper introduces an algorithm to compute the (R, s, S) policy parameters for a two-echelon warehouse non-stationary stochastic lot-sizing problem with backorder. The two-echelon warehouse system refers to a system where the warehouses are divided into business-oriented and customer-oriented two tiers, which are widely used in the real world but poorly studied in the literature. The businessoriented warehouse supplies both the business partners and the customer-oriented warehouse while the customer's demands are met only by the latter. The heuristic combines a backward stochastic dynamic programming and a greedy relaxation of the problem. A technique is proposed to convert customer-oriented sales into the replenishment demands for the businessoriented warehouse. The (R, s, S) policy parameters are then computed for product sales of the customer-oriented warehouse and total demand of the business-oriented warehouse. Moreover, we speed up the procedure by applying a convexity property and some techniques to avoid recomputation, which extends its adoptability to large-scale problems. The results show that the computational efforts remain acceptable as the problems’ sizes increase. Sensitivity analysis shows that the performance is less affected by parameter settings, which represents the stability of the algorithm.

Citation Download Citation

Qingwei Jiang, Hao Yin, and Canrong Zhang "A stochastic dynamic programming based heuristic for the inventory decision-making encountered in a two-echelon warehouse system", Proc. SPIE 12591, Sixth International Conference on Traffic Engineering and Transportation System (ICTETS 2022), 125910P (16 February 2023); https://doi.org/10.1117/12.2668769

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KEYWORDS

Stochastic processes

Computer programming

Control systems

Decision making

Computing systems

Mathematical modeling

Algorithm testing

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