Multi-class Dynamic Inventory Rationing with Stochastic Demands and Backordering
Dynamic inventory rationing is considered for systems with multiple demand classes, stationary stochastic demands, and backordering. In the literature, dynamic programming has been often applied to address this type of problems. However, due to the curse of dimensionality, computation is a critical...
| Main Authors: | , , , |
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| Format: | Journal Article |
| Published: |
Elsevier BV * North-Holland
2015
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| Online Access: | http://hdl.handle.net/20.500.11937/8795 |
| _version_ | 1848745763338715136 |
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| author | Liu, S. Song, M. Tan, Ka Zhang, Changyong |
| author_facet | Liu, S. Song, M. Tan, Ka Zhang, Changyong |
| author_sort | Liu, S. |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | Dynamic inventory rationing is considered for systems with multiple demand classes, stationary stochastic demands, and backordering. In the literature, dynamic programming has been often applied to address this type of problems. However, due to the curse of dimensionality, computation is a critical challenge for dynamic programming. In this paper, an innovative two-step approach is proposed based on an idea similar to the certainty equivalence principle. First the deterministic inventory rationing problem is studied, where the future demands are set to be the expectation of the stochastic demand processes. The important properties obtained from solving the problem with the KKT conditions are then used to develop effective dynamic rationing policies for stochastic demands, which gives closed-form expressions for dynamic rationing thresholds. These expressions are easy to calculate and are applicable to any number of demand classes. Numerical results show that the expressions are close to and provide a lower bound for the optimal dynamic thresholds. They also shed light on important managerial insights, for example, the relation between different parameters and the rationing thresholds. |
| first_indexed | 2025-11-14T06:22:32Z |
| format | Journal Article |
| id | curtin-20.500.11937-8795 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-14T06:22:32Z |
| publishDate | 2015 |
| publisher | Elsevier BV * North-Holland |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-87952017-09-13T14:36:24Z Multi-class Dynamic Inventory Rationing with Stochastic Demands and Backordering Liu, S. Song, M. Tan, Ka Zhang, Changyong Dynamic inventory rationing is considered for systems with multiple demand classes, stationary stochastic demands, and backordering. In the literature, dynamic programming has been often applied to address this type of problems. However, due to the curse of dimensionality, computation is a critical challenge for dynamic programming. In this paper, an innovative two-step approach is proposed based on an idea similar to the certainty equivalence principle. First the deterministic inventory rationing problem is studied, where the future demands are set to be the expectation of the stochastic demand processes. The important properties obtained from solving the problem with the KKT conditions are then used to develop effective dynamic rationing policies for stochastic demands, which gives closed-form expressions for dynamic rationing thresholds. These expressions are easy to calculate and are applicable to any number of demand classes. Numerical results show that the expressions are close to and provide a lower bound for the optimal dynamic thresholds. They also shed light on important managerial insights, for example, the relation between different parameters and the rationing thresholds. 2015 Journal Article http://hdl.handle.net/20.500.11937/8795 10.1016/j.ejor.2015.01.022 Elsevier BV * North-Holland restricted |
| spellingShingle | Liu, S. Song, M. Tan, Ka Zhang, Changyong Multi-class Dynamic Inventory Rationing with Stochastic Demands and Backordering |
| title | Multi-class Dynamic Inventory Rationing with Stochastic Demands and Backordering |
| title_full | Multi-class Dynamic Inventory Rationing with Stochastic Demands and Backordering |
| title_fullStr | Multi-class Dynamic Inventory Rationing with Stochastic Demands and Backordering |
| title_full_unstemmed | Multi-class Dynamic Inventory Rationing with Stochastic Demands and Backordering |
| title_short | Multi-class Dynamic Inventory Rationing with Stochastic Demands and Backordering |
| title_sort | multi-class dynamic inventory rationing with stochastic demands and backordering |
| url | http://hdl.handle.net/20.500.11937/8795 |