A two-echelon inventory-location problem with service considerations

Mak, Ho-Yin and Shen, Zuo-Jun (Max) (2009) A two-echelon inventory-location problem with service considerations. Naval Research Logistics, 56 (8). pp. 730-744.


We study the problem of designing a two-echelon spare parts inventory system consisting of a central plant and a number of service centers each serving a set of customers with stochastic demand. Processing and storage capacities at both levels of facilities are limited. The manufacturing process is modeled as a queuing system at the plant. The goal is to optimize the base-stock levels at both echelons, the location of service centers, and the allocation of customers to centers simultaneously, subject to service constraints. A mixed integer nonlinear programming model (MINLP) is formulated to minimize the total expected cost of the system. The problem is NP-hard and a Lagrangian heuristic is proposed. We present computational results and discuss the trade-off between cost and service.

Item Type: Article
Keywords: supply chain design; service parts inventory systems; response time requirements; management science
Subject(s): Management science
Date Deposited: 17 Jul 2015 14:19
Last Modified: 09 Aug 2018 08:30
Funders: not applicable
URI: http://eureka.sbs.ox.ac.uk/id/eprint/5386

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