Title

Technical note : worst-case performance of power-of-two policies for serial inventory systems with incremental quantity discounts

Document Type

Journal article

Source Publication

Naval Research Logistics

Publication Date

8-1-2007

Volume

54

Issue

5

First Page

583

Last Page

587

Keywords

Inventory/production, Multi-stage with incremental quantity discounts, Power-of-two policies

Abstract

This study presents power-of-two policies for a serial inventory system with constant demand rate and incremental quantity discounts at the most upstream stage. It is shown that an optimal solution is nested and follows a zero-inventory ordering policy. To prove the effectiveness of power-of-two policies, a lower bound on the optimal cost is obtained. A policy that has a cost within 6% of the lower bound is developed for a fixed base planning period. For a variable base planning period, a 98% effective policy is provided. An extension is included for a system with price dependent holding costs.

DOI

10.1002/nav.20220

Print ISSN

0894069X

Publisher Statement

Copyright © 2007 Wiley Periodicals, Inc. Access to external full text or publisher's version may require subscription.

Full-text Version

Publisher’s Version

Language

English

Recommended Citation

Rieksts, B. Q., Ventura, J. A., Herer, Y. T., & Sun, D. (2007). Technical note: Worst-case performance of power-of-two policies for serial inventory systems with incremental quantity discounts. Naval Research Logistics, 54(5), 583-587. doi: 10.1002/nav.20220

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