Seminar

Abstract

Virtual inventory sharing is an effective method to pool inventories in spare parts networks. We propose a novel location-inventory model which integrates (1) strategic facility choice, (2) tactical base-stock level setting and (3) operational sourcing decisions. The mixed integer linear program (MILP) combines a set-covering problem and a semi-Markov decision process (SMDP) which constitutes a new modeling paradigm with many potential applications for other supply chain problems. Due to the integration of the three decision stages, physical and virtual inventory pooling opportunities can be simultaneously evaluated. The model's special structure suggests Benders' decomposition (BD) as an effective method to solve the problem and several improvement techniques (like an SMDP state space reduction method or Master valid inequalities) are used to expedite convergence. Numerical experiments confirm the efficiency of BD and emphasize the value of an integrated model compared to a sequential `location first, inventory and sourcing second` approach. Integrated planning achieves average cost savings of 6.8% which are mainly driven by virtual sharing opportunities that networks offer. Furthermore, the results suggest that the integrated approach favors additional inventory build-up if virtual sharing opportunities increase.

Short Bio

Stefan Minner is a Full Professor for Logistics and Supply Chain Management at the School of Management, Technical University of Munich, Germany. Before, he held positions at the Universities of Paderborn, Mannheim, and Vienna. He studied Business Administration with specialization in Operations Research at the University of Bielefeld, received his doctoral degree from the Otto-von-Guericke University in Magdeburg, and was a postdoctoral researcher at the University of Calgary. His primary research interests are logistics network design under uncertainty, transportation optimization including smart mobility concepts, and inventory management. Recent projects include logistics for the automotive industry, retail operations, and last-mile city logistics. In his consulting work, Stefan Minner has cooperated with several national and international companies from various industries. Stefan Minner serves on several editorial boards of logistics and operations research journals. Currently, Stefan Minner is the Editor-in-Chief of the International Journal of Production Economics. His research was published in many peer reviewed journals, including Manufacturing & Service Operations Management, Operations Research, Production and Operations Management, Transportation Research Part B, European Journal of Operational Research and OR Spectrum. In 2014, he was listed among the top 25 most productive researchers in Business Administration in Germany by Handelsblatt. He is a fellow of the International Society for Inventory Research (ISIR), vice-chairman of the scientific advisory board of the German Logistics Association (BVL), a member of the Research Committee of the European Logistics Association (ELA), and the speaker of the research training group “Advanced Optimization in a Networked Economy (AdONE)” at Technical University of Munich.