Leroy B. Schwarz

Scheduling Policies for Automatic Warehousing Systems: Simulation Results

Abstract This paper examines and extends previous analytical work on the scheduling of stacker cranes in automatic warehousing systems. In particular, the following are examined by means of a computer simulation: (1) The performance of the closest-open-location rule compared to random storage assignment; (2) The dynamic behavior of the system under stochastic conditions, using various crane and rack utilization levels; (3) The actual versus predicted reduction in crane travel time due to improved scheduling rules; (4) The effect of imperfect information concerning the length of stay of an incoming pallet on system performance. The results of our experiments provide evidence in support of the proposed analytical models. Most important, the experiments demonstrate the value of previously-proposed scheduling rules in a dynamic, stochastic environment operating with imperfect information.

Secure supply-chain protocols

Supply chain interactions have huge economic importance, yet these interactions are managed inefficiently. One of the major sources of inefficiency in supply-chain management is information asymmetry; i.e., information that is available to one or more organizations in the chain (e.g., manufacturer, retailer) is not available to others. There are several causes of information asymmetry, among them fear that a powerful buyer or supplier will take advantage of private information, that information will leak to a competitor, etc. We propose secure supply-chain collaboration (SSCC) protocols that enable supply-chain partners to cooperatively achieve desired system-wide goals without revealing the private information of any of the parties, even though the jointly computed decisions require the information of all the parties. Secure supply-chain collaboration has the potential to improve supply-chain management practice, and by removing a major inefficiency therein, improves productivity. We present specific SSCC protocols for two types of supply-chain interactions: capacity allocation, and e-auctions (electronic auctions). In the course of doing so, we design techniques that are of independent interest, and are likely to be useful in the design of future SSCC protocols.

Optimal and Heuristic Facility Phase-out Strategies

Abstract This paper presents an efficient branch and bound algorithm and near optimal heuristic algorithms for solving the problem of withdrawing inventory and/or service facilities for a good or service whose overall demand is declining over time. In particular, this paper models the problem faced by a manager who must consider closing up to M initially open and operating support facilities as demand shifts and declines over a T period planning horizon. The criterion is minimization of total estimated discounted costs. The costs considered are the variable operating cost at each facility, the transportation costs between facilities and demand centers, and the costs to operate and close each facility. Computational results are presented for both the optimum finding and heuristic algorithms.

Economic Order Quantities for Products with Finite Demand Horizons

Abstract Industrial engineers have for many years recommended the implementation of EOQ policies in applications in which the strict assumptions of the EOQ model are not satisfied. There are two reasons for this: 1) the EOQ model is a relatively robust model; that is, it is insensitive to at least some of its assumptions; and 2) the lack of a suitable alternative policy. This paper presents a simple generalization of the EOQ model which allows the model to be directly applicable to products with a finite product life. The model is: 1) computationally simple to use; and 2) yields policies which are appreciably less costly than currently employed alternative policies.

Physical Distribution: The Analysis of Inventory and Location

Abstract The cost and service level performance of a manufacturing system or a distribution system depend heavily on the interaction between the physical system design and the inventory control system. This paper examines that interaction and provides some general analytical guidelines for (1) the determination of total system inventory and its distribution within a fixed system design, and (2) the determination of system design as suggested or favored by inventory considerations.

Extensions of the Multi-Period Facility Phase-Out Model: New Procedures and Application to a Phase-In/Phase-Out Problem

Abstract This paper extends the multi-period facility phase-out model of Roodman and Schwarz in two ways: First, the branch-and-bound procedure is improved by the incorporation of two new lower bounds, which are both easier to obtain and more powerful than those originally proposed, and the addition of two new simplifications. Second, the model itself is generalized to solve a phase-in/phase-out problem. The improved branch-and-bound procedure is directly applicable to the static facility location models of Efroymson and Ray and Khumawala, and has consistently solved sample static problems faster than the methods proposed by these authors.

Balancing Retailer Inventories

This paper examines the optimality of inventory “balancing” in a one-warehouse N-retailer distribution system facing stochastic demand for a single product over T successive time intervals. In particular, we consider the division of predetermined quantities of warehouse stock among retailers in each interval. Balancing attempts to bring the retailer-inventories to the same (normalized with respect to first-interval demand) net inventory level. When the demand distribution over the T periods is symmetric with respect to all pairs of retailers, and retailer cost over the T-intervals is a convex function of the T shipments, we show that balancing divisions are optimal. The required convexity condition is shown to be satisfied for some familiar cost functions when shortages are backordered and lost. However for other cost functions, the convexity condition is satisfied under backordering, but not under lost sales. We also consider the nonidentical-retailer (demands are not symmetric) case and provide examples...

Backorders optimization in a one-warehouse N-identical retailer distribution system

This article examines the allocation of safety stock between sectors in a one-warehouse N-retailer distribution system which follows a (Q,R) inventory replenishment policy. In particular, the so-called „portfolio” motive for holding warehouse safety-stock inventory is investigated. Two optimization problems involving the tradeoff between average system inventory investment and customer service, i.e., customer backorders, are considered and shown to be equivalent to a simpler optimization problem involving the tradeoff between customer service and system safety stock. Equivalence implies that the set of optimal policies for the simpler optimization problem provides all of the optimal policies for the more complex ones. This equivalence result is applied to the Deuermeyer and Schwarz (DS) model of the distribution system under study. Bounds on the set of optimal policies are provided. A heuristic for minimizing expected backorders with respect to a constraint on average system on-hand inventory is introduced, and empirical tests described. The heuristic, which prescribes little warehouse on-hand inventory, appears to be near optimal for the DS model. A simulation study supports this „near-zero” inventory prescription for the warehouse.

Technical Note—A Note on the Near Optimality of “5-EOQ's Worth” Forecast Horizons

This note contributes analytical insight into Lundin and Mortons empirical observation concerning the near optimality of “5-EOQs worth” forecast horizons. They observed that, using protective procedures, forecast horizons corresponding to 5-EOQs supply guarantee a first-period decision no more than one percent above optimum in an infinite horizon, periodic review, deterministic production planning problem. This note presents similar analytical results for the corresponding infinite horizon, continuous review, deterministic model.

The Unexpected Impact of Information Sharing on US Pharmaceutical Supply Chains

This paper examines a change in business practices in the pharmaceutical manufacturer-to-distributor supply chain, a change that essentially forced pharmaceutical distributors to maintain lower inventories. This change also provided pharmaceutical manufacturers with information about distributor customer demand and inventories that had previously been withheld from them. Supply chain theory and practice in other industries suggest that by improving decision making and implementation, companies can operate with substantially lower inventories. This happened in pharmaceutical distribution when a Securities and Exchange Commission investigation led manufacturers to force distributors to operate with less inventory. Theory and practice further suggest that manufacturers who are provided with relevant information that they did not have previously would take advantage of this information to reduce their inventories. This evidently did not happen in pharmaceutical manufacturing. We contend that pharmaceutical manufacturers either do not know how to take advantage of such information or they do not care.