Robust multi-echelon multi-period inventory control

Abstract

We consider the problem of minimizing the overall cost of a supply chain, over a possible long horizon, under demand uncertainly which is known only crudely. Under such circumstances, the method of choice is Robust Optimization, in particular the Affinely Adjustable Robust Counterpart (AARC) method which leads to tractable deterministic optimization problems. The latter is due to a recent re-parametrization technique for discrete time linear control systems. In this paper we model, analyze and test an extension of the AARC method known as the Globalized Robust Counterpart (GRC) in order to control inventories in serial supply chains. A simulation study demonstrates the merit of the methods employed here, in particular, it shows that a good control law that minimizes cost achieves simultaneously good control of the bullwhip effect.