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

Brian Q. RIEKSTS, José A. VENTURA, Yale T. HERER, Daning SUN

Research output: Journal PublicationsJournal Article (refereed)

6 Citations (Scopus)

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.
Original languageEnglish
Pages (from-to)583-587
Number of pages5
JournalNaval Research Logistics
Volume54
Issue number5
DOIs
Publication statusPublished - 1 Aug 2007

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Keywords

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

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