inventory optimization algorithm

Question

I have been researching different ways to optimize inventory and came across this text by, "Nuri Sercan Ozbay" which states,

Does anyone know how to actually apply this algorithm? Or has anyone actually seen this before?

Answer 1

This seems to be an excerpt from a PhD thesis on Solving Robust Inventory Problems - http://www.corc.ieor.columbia.edu/theses/ozbay.pdf

The problem is modeled in two stages. In the inner problem - the worst case cost, arising from a demand scenario that leads to the maximum cost. The outer problem is minimizing this worst stage cost.

The problem with most such robust formulations is that they tend to be overly conservative solutions. You are finding an inventory policy that is optimized to the worst case scenario.

If this is the route you intend to take, there are other papers which describe tractable solutions to robust inventory problems e.g., http://www.optimization-online.org/DB_FILE/2007/04/1640.pdf