On the replenishment policy considering less expensive but non-committed supply |
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| Authors: | Peng Wu Xiuli Chao Jian Chen |
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| Institution: | 1. School of Business, Sichuan University, Chengdu 610064, China;2. Department of Industrial and Operations Engineering, University of Michigan, Ann Arbor, MI 48109, USA;3. School of Economics and Management, Tsinghua University, Beijing 100084, China |
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| Abstract: | We study an inventory system that replenishes its stock through two shipping services, of which the non-committed shipping service can only ship up to a random capacity that is not known until shipment. By transforming the non-convex optimization in the dynamic program to a convex optimization problem, we show that the optimal policy for each period is determined by a quota for the non-committed shipping and a base-stock level for the committed shipping. |
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| Keywords: | Stochastic inventory system Convexity Submodularity Random supply capacity |
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