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                                                     Seminar

             Department of Systems Engineering and Engineering Management
                                  The Chinese University of Hong Kong

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Title

:

Single-Stage Bounds for Optimal Policies in Serial Inventory Systems with Non-stationary Demand

　

　

　

Speaker

:

Prof. Kevin Shang

　

　

Fuqua School of Business

　

　

Duke University

　

　

　

Date

:

July 7th, 2010 (Wednesday)

　

　

　

Time

:

10:30 a.m. - 11:30 a.m.

　

　

　

Venue

:

Room 513

　

　

William M.W. Mong Engineering Building

　

　

(Engineering Building Complex Phase 2)

　

　

CUHK

　

　

　

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Abstract:
　

Customer demand process is often non-stationary in practice. The non-stationary demand has made managers difficult to match demand with supply efficiently. One reason for such a difficulty is computation – to obtain a system-wide optimal solution, a central planner often has to conduct involved recursive calculations with full knowledge on system parameters in each time period.

This paper presents an approach to simplify the computation. We use a classic inventory model studied by Clark and Scarf (1960) as an example. More specifically, Clark and Scarf consider a two-stage inventory system in a finite horizon. They show that echelon base-stock policies are optimal. The optimal base-stock levels can be obtained by solving two sets of recursive, functional equations. While finding the downstream base-stock level is essentially the same as solving a single-stage system, finding the upstream one is more complex because the functional equation depends on the downstream solution. This paper provides an approach that can generate an effective upstream base-stock level without considering the downstream decision. More specifically, we show that the optimal upstream base-stock level is bounded above and below by the optimal base-stock level obtained from a single-stage system. The construction of these single-stage solution bounds is based on three results: (1) The optimal value function of the original system is bounded above and below by that of a revised two-stage system; (2) the optimal base-stock levels of the revised systems, in turn, bound the optimal upstream solution; (3) the revised two-stage systems are essentially equivalent to a single-stage system. An effective heuristic for the upstream base-stock level is proposed by employing a weighted average of the single-stage solution bounds. Our results can be extended to general multi-stage systems with Markov modulated demand.


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Biography:
　

Kevin Shang is an Associate Professor of Operations Management at the Fuqua School of Business, Duke University. He received his M.B.A. from University of California, Riverside in 1998 and Ph.D. from University of California, Irvine in 2002. Prof. Shang’s research interests include supply chain management, production planning and inventory control, and logistics management. He currently serves as Associate Editor for Management Science, Manufacturing & Service Operations Management and Naval Research Logistics. Prof. Shang teaches Operations Management for the Full-Time and Executive MBA programs.


************************* ALL ARE WELCOME ************************

　

　

　

Host

:

Prof. Zhou Xiang, Sean

Tel

:

(852) 2609-8336

Email

:

zhoux@se.cuhk.edu.hk

　

　

　

Enquiries

:

Prof. Nan Chen or Prof. Sean X. Zhou

　

:

Department of Systems Engineering and Engineering Management

　

　

CUHK

Website

:

http://www.se.cuhk.edu.hk/~seg5810

Email

:

seg5810@se.cuhk.edu.hk

　

　

　

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