Chapter 7

Simple Heuristics for Optimal Inventory Policies in Supply Chains

Kevin H. Shang
Fuqua School of Business, Duke University, Durham, North Carolina 27708, khshang@duke.edu

Abstract
This tutorial summarizes recent development on simple heuristics for optimal inventory policies in supply chains. The considered policies are reorder point, order quantity policies and base-stock, reorder interval policies. The former (latter) policies are often implemented in a continuous-review (periodic-review) inventory system. There are fixed order costs for inventory replenishment. The proposed heuristics share a common approach that solves a set of independent, single-stage problems, whose parameters are obtained from the original system data. These heuristics not only simplify the computation and implementation but also help gain insights on managing inventory in supply chains.

Keywords: inventory control; supply chain management; heuristics

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Citation information:

Shang, K. H. Simple Heuristics for Optimal Inventory Policies in Supply Chains. J. Geunes, ed. INFORMS TutORials in Operations Research, Vol. 8. INFORMS, Hanover, MD, pp. 106--128.