### Abstract

In this paper, we consider a deterministic nested substitution problem where there are multiple products which can be substituted one for the other, if necessary, at a certain cost. We consider the case when there are n products, and product j can substitute products j+1, ..., n at certain costs. The trade-off is the cost of storing products (for example, customized products) at a higher inventory holding stage versus the cost of transferring downwards from a lower inventory holding cost (generic product) stage. The standard approach to solving the problem yields an intractable formulation, but by reformulating the problem to determine the optimal run-out times, we are able to determine the optimal order and substitution quantities. Numerical examples showing the effect of various system parameters on the optimal order and substitution policy are also presented.

Original language | English (US) |
---|---|

Pages (from-to) | 129-133 |

Number of pages | 5 |

Journal | Journal of the Operational Research Society |

Volume | 51 |

Issue number | 1 |

State | Published - Jan 2000 |

Externally published | Yes |

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### ASJC Scopus subject areas

- Management of Technology and Innovation
- Strategy and Management
- Management Science and Operations Research

### Cite this

*Journal of the Operational Research Society*,

*51*(1), 129-133.

**Deterministic hierarchical substitution inventory models.** / Gurnani, H.; Drezner, Z.

Research output: Contribution to journal › Article

*Journal of the Operational Research Society*, vol. 51, no. 1, pp. 129-133.

}

TY - JOUR

T1 - Deterministic hierarchical substitution inventory models

AU - Gurnani, H.

AU - Drezner, Z.

PY - 2000/1

Y1 - 2000/1

N2 - In this paper, we consider a deterministic nested substitution problem where there are multiple products which can be substituted one for the other, if necessary, at a certain cost. We consider the case when there are n products, and product j can substitute products j+1, ..., n at certain costs. The trade-off is the cost of storing products (for example, customized products) at a higher inventory holding stage versus the cost of transferring downwards from a lower inventory holding cost (generic product) stage. The standard approach to solving the problem yields an intractable formulation, but by reformulating the problem to determine the optimal run-out times, we are able to determine the optimal order and substitution quantities. Numerical examples showing the effect of various system parameters on the optimal order and substitution policy are also presented.

AB - In this paper, we consider a deterministic nested substitution problem where there are multiple products which can be substituted one for the other, if necessary, at a certain cost. We consider the case when there are n products, and product j can substitute products j+1, ..., n at certain costs. The trade-off is the cost of storing products (for example, customized products) at a higher inventory holding stage versus the cost of transferring downwards from a lower inventory holding cost (generic product) stage. The standard approach to solving the problem yields an intractable formulation, but by reformulating the problem to determine the optimal run-out times, we are able to determine the optimal order and substitution quantities. Numerical examples showing the effect of various system parameters on the optimal order and substitution policy are also presented.

UR - http://www.scopus.com/inward/record.url?scp=0033904595&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=0033904595&partnerID=8YFLogxK

M3 - Article

AN - SCOPUS:0033904595

VL - 51

SP - 129

EP - 133

JO - Journal of the Operational Research Society

JF - Journal of the Operational Research Society

SN - 0160-5682

IS - 1

ER -