Journal
EUROPEAN JOURNAL OF OPERATIONAL RESEARCH
Volume 213, Issue 1, Pages 107-118Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.ejor.2011.02.031
Keywords
Production; Inventory; Simulation; Regression analysis; Supply-chain management
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We present a heuristic optimization method for stochastic production-inventory systems that defy analytical modelling and optimization. The proposed heuristic takes advantage of simulation while at the same time minimizes the impact of the dimensionality curse by using regression analysis. The heuristic was developed and tested for an oil and gas company, which decided to adopt the heuristic as the optimization method for a supply-chain design project. To explore the performance of the heuristic in general settings, we conducted a simulation experiment on 900 test problems. We found that the average cost error of using the proposed heuristic was reasonably low for practical applications. (C) 2011 Elsevier B.V. All rights reserved.
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