Dampening bullwhip effect of order-up-to inventory strategies via an optimal control method
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In this paper, we consider the bullwhip effect problem of an Order-Up-To (OUT) inventory strategy for a supply chain system. We firstly establish a new discrete-time dynamical model which is suitable to describe the OUT inventory strategy. Then, we analyze the bullwhip effect for the dynamical model of the supply chain system. We thus transform the bullwhip effect's dampening problem to a discrete-time optimal control problem. By using the Pontryagin's maximum principle, we compute the corresponding optimal control and obtain the optimal manufacturer productivity of goods. Finally, we carry out numerical simulation experiments to show that the devised optimal control strategy is useful to dampen the bullwhip effect which always happens in the supply chain system.
This is a pre-copy-editing, author-produced PDF of an article accepted for publication in Numerical Algebra, Control and Optimization following peer review. The definitive publisher-authenticated version Xu, Honglei and Sui, Peng and Zhou, Guanglu and Caccetta, Louis. 2013. Dampening bullwhip effect of order-up-to inventory strategies via an optimal control method. Numerical Algebra, Control and Optimization. 3 (4): pp. 655-664, is available online at: http://doi.org/10.3934/naco.2013.3.655
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