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Augmented Lagrangian Approach to the Newsvendor Model with Component Commonality

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submitted on 2024-03-10, 07:01 and posted on 2024-03-10, 07:01 authored by Abdelouahed Hamdi, Lotfi Tadj

Component commonality is a well-known approach in manufacturing, where the same components are used for multiple products. It has been implemented by many established companies such as Airbus, Kodak, Toyota, etc. We consider a standard two-product inventory model with a common component. The demands for the products are independent random variables. Instead of the usual approach to minimize the total shortage quantity, we propose to minimize the total shortage cost. The resulting problem is a non-convex nonlinear mathematical program. We illustrate the use of a primal-dual proximal method to solve this problem by obtaining numerically the optimal allocations of components. In particular, we show that a higher unit shortage cost induces a higher allocation.

Other Information

Published in: Mathematical and Computational Applications
License: https://creativecommons.org/licenses/by/4.0/
See article on publisher's website: https://dx.doi.org/10.3390/mca24020055

Funding

Open Access funding provided by the Qatar National Library.

History

Language

  • English

Publisher

MDPI

Publication Year

  • 2019

License statement

This Item is licensed under the Creative Commons Attribution 4.0 International License.

Institution affiliated with

  • Qatar University
  • College of Arts and Sciences - QU

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