An Inventory Optimization Model Under Demand Uncertainty for Autonomous Multi-site Inventory Planning with Material Substitutability and Transshipment

Abstract

This paper addresses multi-site inventory planning of raw materials in the packaging printing industry subject to demand uncertainty. Two types of material A and B exist in this setting where material B is converted to material A and material A is used for the main production. In addition, items of type A are substitutable with similar material specifications and can be transshipped across production sites to balance the inventory level in the entire network. The practice is currently carried out purely manually in the packaging printing sites of our industrial partner. With that in mind, we develop a holistic inventory optimization model to automate optimal inventory replenishment of raw materials with substitutability and transshipment support across multiple production sites. The objective is to minimize the global expected cost with respect to stochastic material demand.