Optimal outbound shipment policy for an inventory system with advance demand information

Abstract

This paper examines a single-echelon inventory system that fulfills stochastic orders from a production facility using a time-based shipment consolidation strategy. In this system, the production facility provides advance demand information to the warehouse, ensuring that all orders are placed with a positive demand lead time. Using value iteration, we identify the optimal outbound shipment quantities while accounting for costs related to early deliveries, late deliveries, and shipments. Additionally, this research highlights the impact of advance demand information on transportation capacity planning and the optimization of load factors