Scandinavian Working Papers in Business Administration
CORAL Working Papers,
University of Aarhus, Aarhus School of Business, Department of Business Studies
No L-2007-01: The Q(s,S) control policy for the joint replenishment problem extended to the case of correlation among item-demands
Christian Larsen ()
Additional contact information
Christian Larsen: Department of Business Studies, Aarhus School of Business, Postal: The Aarhus School of Business, Fuglesangs Allé 4, 8210 Aarhus V, Denmark
Abstract: We develop an algorithm to compute an optimal Q(s,S) policy for the joint replenishment problem when demands follow a compound correlated Poisson process. It is a non-trivial generalization of the work by Nielsen and Larsen (2005). We make some numerical analyses on two-item problems where we compare the optimal Q(s,S) policy to the optimal uncoordinated (s,S) policies. The results indicate that the more negative the correlation the less advantageous it is to coordinate. Therefore, in some cases the degree of correlation determines whether to apply the coordinated Q(s,S) policy or the uncoordinated (s,S) policies. Finally, we compare the Q(s,S) policy and the closely connected P(s,S) policy. Here we explain why the Q(s,S) policy is a better choice if item-demands are correlated.
Keywords: joint replenishment problem; compound correlated Poisson process
23 pages, January 4, 2007
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L_2007_01.pdf
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