A robust optimization for multi-period lost sales inventory control problem

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Abstract

We consider a periodic review inventory control problem of minimizing inventory cost, production cost, and lost sales under demand uncertainty, in which product demands are not specified exactly and it is only known to belong to a given uncertainty set. We propose a robust optimization formulation for obtaining lowest cost possible and guaranteeing the feasibility with respect to range of order quantity and inventory level for possible values of the data from the uncertainty set. Our formulation is based on the affinely adaptive robust counterpart, which suppose order quantity is affine function of past demands. We derive certainty equivalent problem via second-order cone programming, which gives 'not too pessimistic' worst-case.

Original languageEnglish
Pages (from-to)375-381
Number of pages7
JournalOperations and Supply Chain Management
Volume13
Issue number4
DOIs
Publication statusPublished - 2020

Keywords

  • Adaptive robust
  • Inventory control
  • Optimization
  • Second order-cone-programming

ASJC Scopus subject areas

  • Management Information Systems
  • Statistics, Probability and Uncertainty
  • Management Science and Operations Research
  • Information Systems and Management

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