The Benefit of Receding Horizon Control: Near-Optimal Policies for Stochastic Inventory Control

Dural-Selcuk, Gozdem; Rossi, Roberto; Kilic, Onur A.; Tarim, S. Armagan

The Benefit of Receding Horizon Control: Near-Optimal Policies for Stochastic Inventory Control

Date

2020

Authors

Publisher

Pergamon-elsevier Science Ltd

Organizational Units

Organizational Unit

Industrial Engineering

(1998)

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Abstract

In this paper we address the single-item, single-stocking point, non-stationary stochastic lot-sizing problem under backorder costs. It is well known that the (s, S) policy provides the optimal control for such inventory systems. However the computational difficulties and the nervousness inherent in (s, S) paved the way for the development of various near-optimal inventory control policies. We provide a systematic comparison of these policies and present their expected cost performances. We further show that when these policies are used in a receding horizon framework the cost performances improve considerably and differences among policies become insignificant. (C) 2019 Elsevier Ltd. All rights reserved.