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Approximate dynamic programming methods for an inventory allocation problem under uncertainty
Author(s) -
Topaloglu Huseyin,
Kunnumkal Sumit
Publication year - 2006
Publication title -
naval research logistics (nrl)
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.665
H-Index - 68
eISSN - 1520-6750
pISSN - 0894-069X
DOI - 10.1002/nav.20164
Subject(s) - dynamic programming , mathematical optimization , computer science , linear programming , production (economics) , representation (politics) , product (mathematics) , bellman equation , function (biology) , value (mathematics) , mathematics , geometry , evolutionary biology , machine learning , politics , biology , political science , law , economics , macroeconomics
We propose two approximate dynamic programming methods to optimize the distribution operations of a company manufacturing a certain product at multiple production plants and shipping it to different customer locations for sale. We begin by formulating the problem as a dynamic program. Our first approximate dynamic programming method uses a linear approximation of the value function and computes the parameters of this approximation by using the linear programming representation of the dynamic program. Our second method relaxes the constraints that link the decisions for different production plants. Consequently, the dynamic program decomposes by the production plants. Computational experiments show that the proposed methods are computationally attractive, and in particular, the second method performs significantly better than standard benchmarks. © 2006 Wiley Periodicals, Inc. Naval Research Logistics, 2006