Optimizing stochastic production-inventory systems: A heuristic based on simulation and regression analysis

Antonio Arreola-Risa, Víctor M. Giménez-García, José Luis Martínez-Parra

    Research output: Contribution to journalArticleResearchpeer-review

    13 Citations (Scopus)

    Abstract

    We present a heuristic optimization method for stochastic production-inventory systems that defy analytical modelling and optimization. The proposed heuristic takes advantage of simulation while at the same time minimizes the impact of the dimensionality curse by using regression analysis. The heuristic was developed and tested for an oil and gas company, which decided to adopt the heuristic as the optimization method for a supply-chain design project. To explore the performance of the heuristic in general settings, we conducted a simulation experiment on 900 test problems. We found that the average cost error of using the proposed heuristic was reasonably low for practical applications. © 2011 Elsevier B.V. All rights reserved.
    Original languageEnglish
    Pages (from-to)107-118
    JournalEuropean Journal of Operational Research
    Volume213
    DOIs
    Publication statusPublished - 16 Aug 2011

    Keywords

    • Inventory
    • Production
    • Regression analysis
    • Simulation
    • Supply-chain management

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