Polynomial policies in supply chain networks

This thesis aims to solve the periodic-reviewed inventory control problem in supply chain networks with uncertain demand so as to minimize the overall cost of the system over a fixed planning time horizon. In such problems, one seeks to optimally determine ordering quantities at different stages in time. We investigate the class of polynomial policies, where the control policy is directly parametrized polynomially in the observed uncertainties of previous stages. We use sum-of-square relaxations to reformulate the problem into a single semidefinite optimization problem for a specific polynomial degree. We consider both robust and stochastic approaches in order to address the uncertainties in demand. In extensive numerical studies, we find that polynomial policies exhibit better performance over basestock policies across a variety of networks and demand distributions under the mean and standard deviation criteria. However, when the uncertainty set turns out to be larger than planned, basestock policies start outperforming polynomial policies. Comparing the policies obtained under the robust and stochastic frameworks, we find that they are comparable in the average performance criterion, but the robust approach leads to better tail behavior and lower standard deviation in general.

Department dc:contributor.department

Massachusetts Institute of Technology. Computation for Design and Optimization Program.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2010

Author dc:creator

• He, Liwei

Advisor dc:contributor.advisor

• Dimitris Bertsimas.

• Computation for Design and Optimization Program.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/61893

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/61893