Asymptotically Optimal Inventory Control for Assemble-to-Order Systems

DOI10.1287/STSY.2022.0099MaRDI QIDQ6199154zbMATH OpenOpenAlexFDO

Authors Martin I. Reiman, Haohua Wan, Qiong Wang

Publication date 23 February 2024

Published in Stochastic Systems (Search for Journal in Brave)

Copyright license Creative Commons Attribution 4.0 International

Full work available at URL https://arxiv.org/abs/1809.08271

zbMATH Keywords

assemble-to-orderasymptotic optimalityinventory managementstochastic programstochastic tracking model

Mathematics Subject Classification ID

Inventory, storage, reservoirs (90B05) Transportation, logistics and supply chain management (90B06) Stochastic programming (90C15)

Abstract: We consider Assemble-to-Order (ATO) inventory systems with a general Bill of Materials and general deterministic lead times. Unsatisfied demands are always backlogged. We apply a four-step asymptotic framework to develop inventory policies for minimizing the long-run average expected total inventory cost. Our approach features a multi-stage Stochastic Program (SP) to establish a lower bound on the inventory cost and determine parameter values for inventory control. Our replenishment policy deviates from the conventional constant base stock policies to accommodate non-identical lead times. Our component allocation policy differentiates demands based on backlog costs, Bill of Materials, and component availabilities. We prove that our policy is asymptotically optimal on the diffusion scale, that is, as the longest lead time grows, the percentage difference between the average cost under our policy and its lower bound converges to zero. In developing these results, we formulate a broad Stochastic Tracking Model and prove general convergence results from which the asymptotic optimality of our policy follows as specialized corollaries.

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Cited in

(1)

• Asymptotic scaling of optimal cost and asymptotic optimality of base-stock policy in several multidimensional inventory systems

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