New Approximation Guarantees for The Economic Warehouse Lot Scheduling Problem

Abstract: In this paper, we present long-awaited algorithmic advances toward the efficient construction of near-optimal replenishment policies for a true inventory management classic, the economic warehouse lot scheduling problem. While this paradigm has accumulated a massive body of surrounding literature since its inception in the late '50s, we are still very much in the dark as far as basic computational questions are concerned, perhaps due to the evasive nature of dynamic policies in this context. The latter feature forced earlier attempts to either study highly-structured classes of policies or to forgo provably-good performance guarantees altogether; to this day, rigorously analyzable results have been few and far between. The current paper develops novel analytical foundations for directly competing against dynamic policies. Combined with further algorithmic progress and newly-gained insights, these ideas culminate to a polynomial-time approximation scheme for constantly-many commodities as well as to a proof-of-concept $(2-\frac{17}{5000} + \epsilon)$-approximation for general problem instances. In this regard, the efficient design of $\epsilon$-optimal dynamic policies appeared to have been out of reach, since beyond algorithmic challenges by themselves, even the polynomial-space representation of such policies has been a fundamental open question. On the other front, our sub-$2$-approximation constitutes the first improvement over the performance guarantees achievable via ``stationary order sizes and stationary intervals'' (SOSI) policies, which have been state-of-the-art since the mid-'90s.