The Stochastic Guaranteed Service Model with Demand Propagation

• Applicant: Professor Dr. Jörg Rambau
• Subject Area: Mathematics
• Term: from 2018 to 2024
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 419230457

This proposal aims to determine optimal safety stocks for inventory management for general warehouse networks in the presence of outsourcing and expediting opportunities. We plan to find solutions on the basis of the recently developed stochastic guaranteed service model. This model is an extension from the class of guaranteed-service models that, in the literature, constitute a substantial part of the models whose performance has been documented in field studies. The main mathematical method on which this approach is based is two-stage stochastic mixed-integer linear programming with recourse and its algorithmic and computational subtelties. In particular the inclusion of explicit computation of demand propagation inside the model has not yet been accomplished for models from the class of guaranteed service models. A method to effectively and efficiently incorporate the propagation of decision-dependent demands in (Stochastic) Guaranteed Service Models would allow in one go the control of (a) outsourcing, (b) lateral emergency transshipments, and (c) choice of alternative suppliers.

• DFG Programme: Research Grants