A Robust Optimization Approach to Inventory Theory

• Published in: Operations research Vol. 54; no. 1; pp. 150 - 168
• Main Authors: Bertsimas, Dimitris, Thiele, Aurelie
• Format: Journal Article
• Language: English
• Published: Linthicum, MD INFORMS 01.01.2006; Institute for Operations Research and the Management Sciences
• Subjects: Analysis; Applied sciences; Approximation; Carrying costs; Cost efficiency; Cost functions; Dynamic programming; Exact sciences and technology; Fixed costs; integer; Integer programming; inventory; Inventory control; Inventory control, production control. Distribution; Inventory management; linear; Linear programming; Logistics; Mathematical models; Mathematical programming; Operational research and scientific management; Operational research. Management science; Operations research; Optimal policy; Optimization; production; programming; Robust optimization; Robust statistics; stochastic; Studies; Supply chain management; Supply chains; uncertainty; United States; Uncertainty; Fixed cost; Optimal policy; Financial management; Linear programming; Mixed integer programming; integer; Optimization; Trade; Base stock; Inventory control; production: uncertainty; Robustness; Dynamic programming; Complex programming; programming: linear; stochastic; inventory

We propose a general methodology based on robust optimization to address the problem of optimally controlling a supply chain subject to stochastic demand in discrete time. This problem has been studied in the past using dynamic programming, which suffers from dimensionality problems and assumes full...