WANGER-WHITIN MODEL

PERODIC REVIEW: WAGNER-WHITIN MODEL

Wagner and Whitin 1958

Features of the dynamic economic lot-sizing model

1. Demand: different in each period, unlike the EOQ model
2. having zero-inventory ordering(ZIO)
3. finite horizon, consisting of $T$ period
4. place order and receive order instantly
5. holding costs are assessed based on the on-hand inventor

MIP Formulation

decision variables:

variables	meaning
$q_t$	number of units orderd
$y_t$	1 if we order ,0 otherwise
$x_t$	inventory level

parameters:

parameters	meaning
$d_t$	demand
$K$	fixed cost
$h$	holding cost
$c$	purchase cost

the Wagner-Whitin model

KaTeX parse error: Undefined control sequence: \mbox at position 74: …& \tag{3.33}\\ \̲m̲b̲o̲x̲{s.t.}\quad &x_…

M: large number, could be set to ${\sum }_{s=t}^T{d}_s$

Dynamic Programming Algorithm

http://t.csdn.cn/iyQ5Q

Let ${\theta }_t$ be the optimal cost in period $t$. We can define ${\theta }_t$ recursively in terms of ${\theta }_s$ for later periods $s$.

First define ${\theta }_{T+1}\equiv 0$

Then
$${\theta }_t=\underset{t<s\le T+1}{\min }\left\{K+h\sum _{i=t}^{s-1}(i-t)d_i+{\theta }_s\right\}\text{\hspace{1em}(3.39)}$$
Algorithm:

1. ${\theta }_{T+1}\leftarrow 0$
2. $\mathbf{for}t=T,...,1\mathbf{do}$
3. ${\theta }_t\leftarrow \text{right-hand side of(3.39)}$
4. $s_t\leftarrow \text{argmin in right-hand side of(3.39)}$
5. $\mathbf{end}\mathbf{for}$
6. $\mathbf{return}{\theta }_t,s(t)\text{for all}t=1,...T$

equivalent problem

The Wagner-Whitin model is equivalent to a network with $T+1$ modes in which each node represents a time period and an arc from period $t$ to period $s$ represents ordering in period $t$ to satisfy the demands of period $t,t+1,...s-1$. The cost the this arc is
$$K+h\sum _{i=t}^{s-1}(i-t)d_i$$
solving the Wagner-Whitin problem is equivalent to finding a shortest path through the network below:

eg1: a 4-period planning horizon model

parameters	meaning	value
$d_t$	demand	[90,120,80,70]
$K$	fixed cost	500
$h$	holding cost	2 per period

absorbing state
$${\theta }_5=0$$
no need for comparison the only arc from node 4 to node 5 is weighted $K$
$${\theta }_4=K+h(0\cdot d_4)+{\theta }_5,s(4)=5$$
comparing arc $K$ with arc $K+h{D}_4$
θ 3 = min ⁡ { K + h ( 0 ⋅ d 3 ) + θ 4 , K + h ( 0 ⋅ d 3 + 1 ⋅ d 4 ) + θ 5 } = min ⁡ { 1000 , 640 } = 640 , s ( 3 ) = 5 \begin{aligned} \theta_3&=\min\{K+h(0{\cdot}d_3)+\theta_4,K+h(0{\cdot}d_3+1{\cdot}d_4)+\theta_5\}\\ &=\min\{1000,640\}\\ &=640\end{aligned},s(3)=5 θ3​​=min{K+h(0⋅d3​)+θ4​,K+h(0⋅d3​+1⋅d4​)+θ5​}=min{1000,640}=640​,s(3)=5

comparison of $K$, $K+h{D}_3$, $K+h{D}_3+2h{D}_4$
θ 2 = min ⁡ { K + h ( 0 ⋅ d 2 ) + θ 3 , K + h ( 0 ⋅ d 2 + 1 ⋅ d 3 ) + θ 4 , K + h ( 0 ⋅ d 2 + 1 ⋅ d 3 + 2 ⋅ d 4 ) + θ 5 } = min ⁡ { 1140 , 1160 , 940 } = 940 , s ( 2 ) = 5 \begin{aligned} \theta_2& \begin{aligned}=\min\{&K+h(0{\cdot}d_2)+\theta_3,K+h(0{\cdot}d_2+1{\cdot}d_3)+\theta_4,\\ &K+h(0{\cdot}d_2+1{\cdot}d_3+2{\cdot}d_4)+\theta_5\}\end{aligned}\\ &=\min\{1140,1160,940\}\\ &=940\end{aligned},s(2)=5 θ2​​=min{​K+h(0⋅d2​)+θ3​,K+h(0⋅d2​+1⋅d3​)+θ4​,K+h(0⋅d2​+1⋅d3​+2⋅d4​)+θ5​}​=min{1140,1160,940}=940​,s(2)=5

θ 1 = min ⁡ { K + h ( 0 ⋅ d 1 ) + θ 2 , K + h ( 0 ⋅ d 1 + 1 ⋅ d 2 ) + θ 3 , K + h ( 0 ⋅ d 1 + 1 ⋅ d 2 + 2 ⋅ d 3 ) + θ 4 , K + h ( 0 ⋅ d 1 + 1 ⋅ d 2 + 2 ⋅ d 3 + 3 ⋅ d 4 ) + θ 5 } = min ⁡ { 1440 , 1380 , 1560 , 1480 } = 1380 , s ( 1 ) = 3 \begin{aligned} \theta_1& \begin{aligned}=\min\{ &K+h(0{\cdot}d_1)+\theta_2,\\ &K+h(0{\cdot}d_1+1{\cdot}d_2)+\theta_3,\\ &K+h(0{\cdot}d_1+1{\cdot}d_2+2{\cdot}d_3)+\theta_4,\\ &K+h(0{\cdot}d_1+1{\cdot}d_2+2{\cdot}d_3+3{\cdot}d_4)+\theta_5 \}\end{aligned}\\ &=\min\{1440,1380,1560,1480\}\\ &=1380\end{aligned},s(1)=3 θ1​​=min{​K+h(0⋅d1​)+θ2​,K+h(0⋅d1​+1⋅d2​)+θ3​,K+h(0⋅d1​+1⋅d2​+2⋅d3​)+θ4​,K+h(0⋅d1​+1⋅d2​+2⋅d3​+3⋅d4​)+θ5​}​=min{1440,1380,1560,1480}=1380​,s(1)=3

in period 1 we order and $s(1)=3,Q_1=d_1+d_2=210$, and $Q_3=d_3+d_4=150$, total cost is 1380