Travel time analysis for general item location assignment in a rectangular warehouse

A travel time model with general item location assignment in a rectangular warehouse system is presented. We give the exact probability mass functions that characterise the tour of an order picker and derive the first and second moments associated with the tour. We apply the model to analysing order batching and storage allocation strategies in an order picking system. The order picking system is modelled as a queueing system with customer batching. The results are compared and validated via simulation. The effects of batching and batch size on the delay time are discussed with consideration to the picking and sorting times for each batch of orders.     

A fast simulated annealing method for batching precedence-constrained customer orders in a warehouse

Batching customer orders in a warehouse can result in considerable savings in order pickers’ travel distances. Many picker-to-parts warehouses have precedence constraints in picking a customer order. In this paper a joint order-batching and picker routing method is introduced to solve this combined precedence-constrained routing and order-batching problem. It consists of two sub-algorithms: an optimal A^∗-algorithm for the routing; and a simulated annealing algorithm for the batching which estimates the savings gained from batching more than two customer orders to avoid unnecessary routing. For batches of three customer orders, the introduced algorithm produces results with an error of less than 1.2% compared to the optimal solution. It also compares well to other heuristics from literature. A data set from a large Finnish order picking warehouse is rerouted and rebatched resulting in savings of over 5000 kilometres or 16% in travel distance in 3 months compared to the current method.     

Travel time estimation and order batching in a 2-block warehouse

Order batching problem (OBP) is the problem of determining the number of orders to be picked together in one picking tour. Although various objectives may arise in practice, minimizing the average throughput time of a random order is a common concern. In this paper, we consider the OBP for a 2-block rectangular warehouse with the assumptions that orders arrive according to a Poisson process and the method used for routing the order-pickers is the well-known S-shape heuristic. We first elaborate on the first and second moment of the order-picker’s travel time. Then we use these moments to estimate the average throughput time of a random order. This enables us to estimate the optimal picking batch size. Results from simulation show that the method provides a high accuracy level. Furthermore, the method is rather simple and can be easily applied in practice.     

Smoothed Monte Carlo estimators for the time-in-the-red in risk processes

We consider a modified version of the de Finetti model in insurance risk theory in which, when surpluses become negative the company has the possibility of borrowing, and thus continue its operation. For this model we examine the problem of estimating the time-in-the red over a finite horizon via simulation. We propose a smoothed estimator based on a conditioning argument which is very simple to implement as well as particularly efficient, especially when the claim distribution is heavy tailed. We establish unbiasedness for this estimator and show that its variance is lower than the naïve estimator based on counts. Finally we present a number of simulation results showing that the smoothed estimator has variance which is often significantly lower than that of the naïve Monte-Carlo estimator.     

Using Bayesian networks for bankruptcy prediction: Some methodological issues

This study provides operational guidance for building naïve Bayes Bayesian network (BN) models for bankruptcy prediction. First, we suggest a heuristic method that guides the selection of bankruptcy predictors. Based on the correlations and partial correlations among variables, the method aims at eliminating redundant and less relevant variables. A naïve Bayes model is developed using the proposed heuristic method and is found to perform well based on a 10-fold validation analysis. The developed naïve Bayes model consists of eight first-order variables, six of which are continuous. We also provide guidance on building a cascaded model by selecting second-order variables to compensate for missing values of first-order variables. Second, we analyze whether the number of states into which the six continuous variables are discretized has an impact on the model’s performance. Our results show that the model’s performance is the best when the number of states for discretization is either two or three. Starting from four states, the performance starts to deteriorate, probably due to over-fitting. Finally, we experiment whether modeling continuous variables with continuous distributions instead of discretizing them can improve the model’s performance. Our finding suggests that this is not true. One possible reason is that continuous distributions tested by the study do not represent well the underlying distributions of empirical data. Finally, the results of this study could also be applicable to business decision-making contexts other than bankruptcy prediction.     

New TSP Construction Heuristics and Their Relationships to the 2-Opt

Correction heuristics for the traveling salesman problem (TSP), with the 2-Opt applied as a postprocess, are studied with respect to their tour lengths and computation times. This study analyzes the 2-Opt dependency, which indicates how the performance of the 2-Opt depends on the initial tours built by the construction heuristics. In accordance with the analysis, we devise a new construction heuristic, the recursive-selection with long-edge preference (RSL) method, which runs faster than the multiple-fragment method and produces a comparable tour when they are combined with the 2-Opt.     

Material allocation in MRP with tardiness penalties

In this paper, we address some flaws in the material allocation function of Materials Requirements Planning (MRP). The problem formulation differs from standard MRP logic in certain important ways: start and finish times for orders are forced to be realistic and material allocations are made to minimize the total tardiness penalty associated with late completion. We show that the resulting MRP material allocation problem is NP-hard in the strong sense. A lower bound and a heuristic are developed from a mixed integer linear formulation and its Lagrangean relaxation. The lower bound and the heuristics are closer to the optimum in cases where there is either abundant material or considerable competition for material; in intermediate cases, small perturbations in material allocation can have a significant effect. A group of heuristics based on the MRP approach and its modifications is examined; they are optimal under certain conditions. An improvement method that preserves priorities inherent in any given starting solution is also presented. The Lagrangean heuristic performs better than the MRP based heuristics for a set of 3900 small problems, yielding solutions that are about 5% to 10% over the optimal. The best MRP based heuristic does about as well as the Lagrangean heuristic on a set of 120 larger problems, and is 25% to 40% better than the standard MRP approach, on the data sets tested.     

Tabu search and GRASP for the maximum diversity problem

In this paper, we develop new heuristic procedures for the maximum diversity problem (MDP). This NP-hard problem has a significant number of practical applications such as environmental balance, telecommunication services or genetic engineering. The proposed algorithm is based on the tabu search methodology and incorporates memory structures for both construction and improvement. Although proposed in seminal tabu search papers, memory-based constructions have often been implemented in naïve ways that disregard important elements of the fundamental tabu search proposals. We will compare our tabu search construction with a memory-less design and with previous algorithms recently developed for this problem. The constructive method can be coupled with a local search procedure or a short-term tabu search for improved outcomes. Extensive computational experiments with medium and large instances show that the proposed procedure outperforms the best heuristics reported in the literature within short computational times.     

Ship-to-order supplies: Contract breachability and the impact of a manufacturer-owned direct channel

We address the issue of contract breachability in a supply chain involving a retailer and a manufacturer operating under ship-to-order contract terms and stochastic demands. The manufacturer is required to fulfill the retailer’s demands on a continuous basis with little or no advance notice. The issue in such an environment is whether the retailer can “naively” assume that she will get a very high fill rate from the manufacturer and therefore has no need for contract penalties in case the manufacturer’s inventory falls short. We suggest a stochastic calculus framework to study the problem and derive a condition when the retailer’s naïve assumption is justified since the probability of stock-outs of the manufacturer is negligible. That is, the ship-to-order contract will not be breached and the fill rate will be more than a predetermined threshold. Furthermore we find that although the manufacturer-owned direct channel generates more revenue and may reduce the volatility of both inventory and production orders, the ratio between expected direct channel and retail sales affects the benefits.     

Optimal assignment of slack due-dates and sequencing in a single-machine shop

This paper considers the problem of optimal assignment of slack due-dates to n jobs and sequencing them on a single-machine to minimize a penalty function depending on the values of the assigned slack allowance and maximum job tardiness. It is shown that the earliest due-date order yields an optimal sequence and the optimal slack allowance is a simple function of the cost per unit slack allowance.     

When does data envelopment analysis outperform a naïve efficiency measurement model?

This paper compares the results from data envelopment analysis (DEA) to a naïve efficiency measurement model, which generates a scalar efficiency score by averaging all output–input ratios. Random data and real-life data are used to test the relative performance of the naïve model against various DEA models. The results suggest that the proposed the naïve model replicates DEA efficiency scores almost perfectly for constant return-to-scales and low heterogeneity in output–input data. It is therefore concluded that heterogeneity in output–input data is important to take advantage of the capability of DEA. It is also shown that heterogeneity is more relevant to efficiency measurement than the number of dimensions.     

Competitive travelling salesmen problem: A hyper-heuristic approach

We introduce a novel variant of the travelling salesmen problem and propose a hyper-heuristic methodology in order to solve it. In a competitive travelling salesmen problem (CTSP), m travelling salesmen are to visit n cities and the relationship between the travelling salesmen is non-cooperative. The salesmen will receive a payoff if they are the first one to visit a city and they pay a cost for any distance travelled. The objective of each salesman is to visit as many unvisited cities as possible, with a minimum travelling distance. Due to the competitive element, each salesman needs to consider the tours of other salesman when planning their own tour. Since equilibrium analysis is difficult in the CTSP, a hyper-heuristic methodology is developed. The model assumes that each agent adopts a heuristic (or set of heuristics) to choose their moves (or tour) and each agent knows that the moves/tours of all agents are not necessarily optimal. The hyper-heuristic consists of a number of low-level heuristics, each of which can be used to create a move/tour given the heuristics of the other agents, together with a high-level heuristic that is used to select from the low-level heuristics at each decision point. Several computational examples are given to illustrate the effectiveness of the proposed approach.     

Order acceptance and scheduling on two identical parallel machines

We study the order acceptance and scheduling problem on two identical parallel machines. At the beginning of the planning horizon, a firm receives a set of customer orders, each of which has a revenue value, processing time, due date, and tardiness weight. The firm needs to select orders to accept and schedule the accepted orders on two identical parallel machines so as to maximize the total profit. The problem is intractable, so we develop two heuristics and an exact algorithm based on some optimal properties and the Lagrangian relaxation technique. We evaluate the performance of the proposed solution methods via computational experiments. The computational results show that the heuristics are efficient and effective in approximately solving large-sized instances of the problem, while the exact algorithm can only solve small-sized instances.     

Heuristic least-cost computation of discrete classification functions with uncertain argument values

We consider the problem of minimizing the expected cost of computing the correct value of a discrete-valued function when it is costly to determine (inspect) the values of its arguments. This type of problem arises in distributed computing, in the design of interactive expert systems, in reliability analysis of coherent systems, in classification of pattern vectors, and in many other applications. In this paper, we first show that the general problem is NP-hard and then introduce several efficient heuristic sequential inspection procedures for solving it approximately. We obtain theoretical results showing that the heuristics are optimal in important special cases; moreover, their computational structures make them well suited for parallel implementation. Next, for the special case of linear threshold (or discrete linear discriminant) functions, which are widely used in statistical classification procedures, we use Monte Carlo simulation to analyze the performances of the heuristics and to compare the heuristic solutions with the exact (true minimum expected cost) solutions over a wide range of randomly generated test problems. All of the heuristics give average relative errors, compared to the exact optimal solutions, of less than 2%. The best heuristic for this class of functions gives an average relative error of less than 0.05% and runs two to four orders of magnitude faster than the exact solution procedure, for functions with ten arguments.Mr. Warren Kuehner is also Chairman of the Department of Computer and Management Science at Metropolitan State College, 1006 11th Street, Denver, Colorado 80204, U.S.A.     

On-line order batching and sequencing problem with multiple pickers: A hybrid rule-based algorithm

Existing on-line order batching rules, namely fixed time window batching (FTWB) and variable time window batching (VTWB), try to choose the fixed time window in the case of FTWB or the fixed number of orders in the case of VTWB. However, these solutions are not appropriate for the fluctuating order environment. The reasonable assignment of batches to order pickers is also an important issue in order picking systems. Motivated by these issues, we study the problem of integrating on-line order batching and the assignment of the batches, which is called the on-line order batching and sequencing problem with multiple pickers (OOBSPMP). The objective is to minimize the turnover time. To solve the problem, a hybrid rule-based algorithm, referred to FTWB, is proposed in order to form batches and assign them to appropriate pickers under a fluctuating order environment. Three batching situations (off-peak, normal and peak arrival time) and two assigning situations (assigning to one busy picker and assigning to one idle picker) are distinguished. Through a series of experiments, we discover several enlightening findings: (i) the rule-based algorithm demonstrates high effectiveness and efficiency in turnover time with multiple pickers; (ii) the rule-based algorithm leads to an impressive improvement in both saving time and wage costs under different arrival rates, picking devices and time intervals compared with VTWB; (iii) to obtain both good warehouse performance and a reasonable workload distribution, the factors, such as the fixed time window, the average workload per picker and the average idle time per picker are also important issues in analysing the efficiency of order picking systems.     

Production and availability policies through the Markov Decision Process and myopic methods for contractual and selective orders

In this paper, we consider a supply chain with one manufacturer, one retailer, and some online customers. In addition to supplying the retailer, manufacturers may selectively take orders from individuals online. Through the Markov Decision Process, we explore the optimal production and availability policy for a manufacturer to determine whether to produce one more unit of products and whether to indicate “in stock” or “out of stock” on website. We measure the benefits and influences of adding online customers with and without the retailer’s inventory information sharing. We also simulate the production and availability policy via a myopic method, which can be implemented easily in the real world. Prediction of simple switching functions for the production and availability is proposed. We find the information sharing, production capacity and unit profit from online orders are the primary factors influencing manufacturer profits and optimal policy. The manufacturer might reserve 50% production capacity for contractual orders from the retailer and devote the remaining capacity to selective orders from spontaneous online customers.     

Tabu search heuristics for the order batching problem in manual order picking systems

In a manual order picking system, order pickers walk or ride through a distribution warehouse in order to collect items requested by (internal or external) customers. In order to perform these operations efficiently, it is usually required that customer orders be combined into (more substantial) picking orders that are limited in size. The order batching problem considered in this paper deals with the question of how a given set of customer orders should be combined into picking orders such that the total length of all picker tours necessary for all of the requested items to be collected is minimized. For the solution of this problem the authors suggest two approaches based on the tabu search principle. The first is a (classic) tabu search (TS), and the second is the attribute-based hill climber (ABHC). In a series of extensive numerical experiments, these approaches are benchmarked against other solution methods put forward in the current literature. It is demonstrated that the proposed methods are superior to the existing methods and provide solutions which may allow distribution warehouses to operate more efficiently.     

Optimal bidding in auctions of mixed populations of bidders

A mixed population of bidders consists of two asymmetric groups. Members of the first group are game-theoretic players, who maximize their expected profit and incorrectly believe that their opponents act similarly. The second group of bidders adopts an irrational strategy: they either choose their bids randomly following a given probability distribution, in a “naïve” form of bidding, or follow a decision-theoretic approach, maximizing their expected profit under the assumption that all other bids are random. In a sealed bid private-value procurement auction we examine the optimal strategy of a new player, who has perfect knowledge of the structure of the mixed bidder population and enters the auction. The optimal bid of the new bidder is derived when the cost and mark-up follow a uniform distribution in [0, 1]. The effect of the relative size of the group of game-theoretic bidders and the population size on the optimal bid price is established.     

A partial enumeration heuristic for multi-objective flowshop scheduling problems

This paper addresses the flowshop scheduling problem with multiple performance objectives in such a way as to provide the decision maker with approximate Pareto optimal solutions. It is well known that the partial enumeration constructive heuristic NEH and its adaptations perform well for single objectives such as makespan, total tardiness and flowtime. In this paper, we develop a similar heuristic using the concept of Pareto dominance when comparing partial and complete schedules. The heuristic is tested on problems involving combinations of the above criteria. For the two-machine case, and the pairs of objectives: (i) makespan and maximum tardiness, (ii) makespan and total tardiness, the heuristic is compared with branch-and-bound algorithms proposed in the literature. For two and more than two machines, and the criteria combinations considered in this article, the heuristic performance is tested against constructive heuristics reported in the literature. By means of an illustrative example, it is shown that a genetic algorithm from the literature performs better when starting from heuristic solutions rather than random solutions.     

Multiple orders per job batch scheduling with incompatible jobs

The multiple orders per job (MOJ) scheduling problem is presented for the batch-processing environment such as that exemplified by diffusion ovens. A mixed-integer programming formulation is presented for the incompatible job family case wherein only jobs that belong to the same family may be grouped together in a production batch. This optimization formulation is tested through an extensive experimental design with the objective of minimizing total weighted tardiness (maximizing on-time delivery performance). Optimal solutions are achievable for this initial set of 6-to-12 order problems, but it is noted that the optimization model takes an unreasonable amount of computation time, which suggests the need for heuristic development to support the analysis of larger, more practical MOJ batch scheduling problems. A number of simple heuristic approaches are investigated in an attempt to find near-optimal solutions in a reasonable amount of computation time. It is seen that a combination of the heuristics produces near-optimal solutions for small order problems. Further testing proves that these heuristic combinations are the best for large order problems as well.