Modeling lot-size with time-dependent demand based on stochastic programming and case study of drug supply in Chile

PLoS One. 2019 Mar 1;14(3):e0212768. doi: 10.1371/journal.pone.0212768. eCollection 2019.

Abstract

The objective of this paper is to propose a lot-sizing methodology for an inventory system that faces time-dependent random demands and that seeks to minimize total cost as a function of order, purchase, holding and shortage costs. A two-stage stochastic programming framework is derived to optimize lot-sizing decisions over a time horizon. To this end, we simulate a demand time-series by using a generalized autoregressive moving average structure. The modeling includes covariates of the demand, which are used as predictors of this. We describe an algorithm that summarizes the methodology and we discuss its computational framework. A case study with unpublished real-world data is presented to illustrate the potential of this methodology. We report that the accuracy of the demand variance estimator improves when a temporal structure is considered, instead of assuming time-independent demand. The methodology is useful in decisions related to inventory logistics management when the demand shows patterns of temporal dependence.

Publication types

  • Research Support, Non-U.S. Gov't

MeSH terms

  • Chile
  • Humans
  • Models, Theoretical*
  • Pharmaceutical Preparations / supply & distribution*

Substances

  • Pharmaceutical Preparations

Grants and funding

This research was supported partially by fellowship “Becas-Conicyt” (F. Rojas) and grant “Fondecyt 1160868” (V. Leiva), both from the National Commission for Scientific and Technological Research of Chile.