Rolling Horizon Procedures for the Facilities in Series Inventory Model with Nested Schedules

Abstract

This paper develops rolling horizon procedures for solving a multistage inventory problem with facilities-in-series. In such an inventory system, we assume that the raw material is processed successively through several facilities before reaching the customer. The input to a facility comes from one preceding facility (or the raw material) and the output from the facility goes to one succeeding facility (or the customer). The rolling horizon procedures form rolling production schedules by solving a finite horizon multiperiod problem and implementing only the first period's decisions. One period later, the multiperiod problem is updated as better forecasts become available and the process is repeated. The paper considers a simple case when holding costs are linear, production costs on a facility consist of a setup cost and a constant marginal cost of production, and production and holding costs are stationary in time. Demand is allowed to be nonstationary in time. Several rolling horizon procedures are developed for this case and a computational comparison is given.