Two-echelon inventory model with service level constraint and controllable lead time sensitive to order quantity

Abstract

The decision-making and optimization of two-echelon inventory coordination were analyzed with service level constraint and controllable lead time sensitive to order quantity. First, the basic model of this problem was established and based on relevant analysis, the original model could be transformed by minimax method. Then, the optimal order quantity and production quantity influenced by service level constraint were analyzed and the boundary of optimal order quantity and production quantity was given. According to this boundary, the effective method and tactics were put forward to solve the transformed model. In case analysis, the optimal expected total cost of two-echelon inventory can be obtained and it was analyzed how service level constraint and safety factor influence the optimal expected total cost of two-echelon inventory. The results show that the optimal expected total cost of two-echelon inventory is constrained by the higher constraint between service level constraint and safety factor.

Keywords

service level constraint / safety factor / controllable lead time / sensitivity to order quantity / two-echelon

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