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Optimal and System Myopic Policies for Multi-Echelon Production/Inventory Assembly Systems

Leroy B. Schwarz and Linus Schrage
Management Science
Vol. 21, No. 11, Theory Series (Jul., 1975), pp. 1285-1294
Published by: INFORMS
Stable URL: http://www.jstor.org/stable/2629890
Page Count: 10
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Optimal and System Myopic Policies for Multi-Echelon Production/Inventory Assembly Systems
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Abstract

In this paper optimal and near optimal policies are proposed for multi-echelon production/inventory assembly systems under continuous review with constant demand over an infinite planning horizon. Costs at each stage consist of a fixed charge per order or production setup plus a linear holding cost on "echelon" inventory. The objective is minimization of average cost per unit time. The major results of this paper are: a mathematically simple, often optimal, "system myopic" solution, a lower bound on the closeness to optimality of this solution, and a branch and bound algorithm which usually finds the optimal solution quickly.

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