Abstract

Clark and Scarf [1960] characterize optimal policies in a two-echelon, two-location inventory model. We extend their result to the infinite-horizon case (for both discounted and average costs). The computations required are far easier than for the finite horizon problem. Further simplification is achieved for normal demands. We also consider the more interesting case of multiple locations at the lower echelon. We show that, under certain conditions, this problem can be closely approximated by a model with one such location. A rather simple computation thus yields both a near-optimal policy and a good approximation of the cost of the system.

Authors
Awi Federgruen and Paul Zipkin
Format
Journal Article
Publication Date
Journal
Operations Research

Full Citation

Federgruen, Awi and Paul Zipkin
. “Computational issues in an infinite-horizon, multiechelon inventory model.”
Operations Research
vol.
32
, (January 01, 1984):
818
-
836
.