Multi-Product Inventory Planning with Downward Substitution, Stochastic Demand and Setup Costs

In this paper we consider a single period multi-product inventory problem with stochastis demand, setup cost for production, and one-way product substitution in the downward direction. We model the problem as a two-stage integer stochastic problem with recourse where the first stage variable determine which products to produce and how much, and the second stage variables determine how the products are allocated to satisfy the realized demand.[...]

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Year of publication:	2002-07-01
Authors:	Rao, Uday S. ; Swaminathan, Jayashankar M. ; Zhang, Jun
Institutions:	College of Business Administration <Cincinnati, Ohio>
Subject:	Supply Chain Management \| Produktdifferenzierung \| Lagerhaltung \| Substitution

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1 Introduction
2 Relevant Literature
3 Problem Formulation and Analysis
3.1 Assumptions and Stochastic Programming Formulation
3.2 The Recourse Problem
3.3 Properties of the Cost Function
4 Solution Procedure
4.1 A Large Scale MILP Formulation
4.2 Heuristic Algorithms
5 Computational Study
5.1 Experimental Setup
5.2 Performance and Heuristics
5.3 Substitution effects
5.4 Effects of Initial Inventory
6 Model Extentions/Variants
7 Summary
References

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