Two-level lot-sizing with inventory bounds

TL;DR

This paper investigates a two-level supply chain lot-sizing problem with inventory bounds, proposing algorithms for certain cases and proving NP-hardness for others, highlighting computational complexity challenges.

Contribution

It introduces a polynomial dynamic programming algorithm for retailer-level inventory bounds and establishes NP-hardness results for supplier-level bounds and non-splitting demands.

Findings

Polynomial algorithm for retailer-level inventory bounds

NP-hardness when inventory bounds are at the supplier level

Strong NP-hardness with demand lot-splitting constraints

Abstract

We study a two-level uncapacitated lot-sizing problem with inventory bounds that occurs in a supply chain composed of a supplier and a retailer. The first level with the demands is the retailer level and the second one is the supplier level. The aim is to minimize the cost of the supply chain so as to satisfy the demands when the quantity of item that can be held in inventory at each period is limited. The inventory bounds can be imposed at the retailer level, at the supplier level or at both levels. We propose a polynomial dynamic programming algorithm to solve this problem when the inventory bounds are set on the retailer level. When the inventory bounds are set on the supplier level, we show that the problem is NP-hard. We give a pseudo-polynomial algorithm which solves this problem when there are inventory bounds on both levels. In the case where demand lot-splitting is not allowed, i.e. each demand has to be satisfied by a single order, we prove that the uncapacitated lot-sizing problem with inventory bounds is strongly NP-hard. This implies that the two-level lot-sizing problems with inventory bounds are also strongly NP-hard when demand lot-splitting is considered.