Supplement to 'A Simple Heuristic Policy for Stochastic Distribution Inventory Systems with Fixed Shipment Costs'

44 Pages Posted: 15 Jun 2020 Last revised: 8 Sep 2020

See all articles by Han Zhu

Han Zhu

School of Management Science and Engineering, Dongbei University of Finance and Economics

Frank (Youhua) Chen

City Univ. of Hong Kong - College of Business, Dept of Management Sciences

Ming Hu

University of Toronto - Rotman School of Management

Yi Yang

School of Management, Zhejiang University

Date Written: May 20, 2020

Abstract

As a supplement to Zhu et al. (2020), this document consists of five parts. First, it provides technical proofs of some theoretical results in Zhu et al. (2020). Second, it introduces some preliminary results on stochastic distribution systems with fixed shipment costs. Third, it provides some examples and illustrations on the modified echelon (r,Q) policies (and some related concepts) studied in Zhu et al. (2020). Fourth, it presents some explicit performance bounds that depends on system primitives for the modified echelon (r,Q) policies in stochastic distribution systems. Finally, extensive numerical experiments are conducted to test the effectiveness of the modified echelon (r,Q) policies. Specifically, the numerical studies show that the modified echelon (r,Q) policies perform well with an average gap of about 5% above the cost lower bound, 2) outperform the echelon-stock (r, Q) policy used in Chen and Zheng (1997), and 3) have robust performances with respect to the allocation rule at the warehouse.

Suggested Citation

Zhu, Han and Chen, Frank (Youhua) and Hu, Ming and Yang, Yi, Supplement to 'A Simple Heuristic Policy for Stochastic Distribution Inventory Systems with Fixed Shipment Costs' (May 20, 2020). Available at SSRN: https://ssrn.com/abstract=3606084 or http://dx.doi.org/10.2139/ssrn.3606084

Han Zhu (Contact Author)

School of Management Science and Engineering, Dongbei University of Finance and Economics ( email )

No. 217 Jianshan St.
Dalian, Liaoning 116025
China

Frank (Youhua) Chen

City Univ. of Hong Kong - College of Business, Dept of Management Sciences ( email )

Kowloon Tong
Hong Kong

HOME PAGE: http://www.cb.cityu.edu.hk/staff/youhchen

Ming Hu

University of Toronto - Rotman School of Management ( email )

105 St. George st
Toronto, ON M5S 3E6
Canada
416-946-5207 (Phone)

HOME PAGE: http://ming.hu

Yi Yang

School of Management, Zhejiang University ( email )

38 Zheda Road
Hangzhou, Zhejiang 310058
China

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