Approximate Dynamic Programming Methods for an Inventory Allocation Problem under Uncertainty
By Sumit Kunnumkal, Huseyin Topaloglu
Naval Research Logistics Quarterly | June 2006
DOI
onlinelibrary.wiley.com/doi/epdf/10.1002/nav.20164
Citation
Kunnumkal, Sumit., Huseyin Topaloglu. Approximate Dynamic Programming Methods for an Inventory Allocation Problem under Uncertainty Naval Research Logistics Quarterly onlinelibrary.wiley.com/doi/epdf/10.1002/nav.20164.
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Naval Research Logistics Quarterly, 2006
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Abstract
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.

Sumit Kunnumkal is a Professor and Area Leader of Operations Management at the Indian School of Business (ISB). He holds a PhD in Operations Research from Cornell University. He received his MS in Transportation from the Massachusetts Institute of Technology and a B.Tech in Civil Engineering from the Indian Institute of Technology, Madras.

Professor Kunnumkal has previously taught at the Smith School of Business, Queen’s University, and has held visiting positions at the Singapore University of Technology and Design and Universitat Pompeu Fabra. His research interests lie in the areas of pricing and revenue management, retail operations, assortment planning, and approximate dynamic programming.

At ISB, he has taught in the PGP programme, the Fellow programme, and various Advanced Management and Executive Education programmes.

Sumit Kunnumkal
Sumit Kunnumkal