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Northwestern University

Kellogg Operations Workshop 2006

"Synchronized Base Stock Policies"

Ton de Kok

Abstract

In this presentation we discuss a class of policies that allows for a
rigorous performance analysis of periodic review multi-item,
multi-echelon inventory systems with constant lead times: synchronized
base stock (SBS) policies. Assuming no lot sizing restrictions, for
divergent and convergent systems these policies are optimal: echelon
order-up-to-level policies. For general structures and/or systems with
lot sizing constraints there is no clear reference with respect to
performance. Exploratory research based on comparison with rolling
scheduling concepts indicates that SBS policies perform well. We discuss
the general principles of SBS policies, structural insights and
managerial insights. The managerial insights have been derived from the
computation of close-to-optimal SBS policies. We discuss optimality
conditions that enable efficient computation of these policies.

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