Ordering Policies for Multi-Item Inventory Systems with Correlated Demands
Published in European Journal of Operational Research, 2025
This paper investigates optimal ordering policies for a multi-item periodic-review inventory system, considering demand correlations and historical data for the products involved. We extend inventory models by transitioning from an autoregressive moving average (ARMA) demand process to a vector autoregressive moving average (VARMA) framework, explicitly characterizing optimal ordering policies when there is both autocorrelation and cross-correlation among multiple items. Through experimental studies, we evaluate inventory costs and cost improvements compared to multi-item ordering policies where demands are assumed to be independent under different degrees of correlation, noise levels, and training data window sizes. The results show that, for moderate to high levels of dependence among products, the proposed framework can meaningfully decrease inventory costs. Additionally, we apply our findings to real-world data to optimize inventory policies for immunoglobulin sub-products, intravenous (IVIg) and subcutaneous (SCIg). The results of the case study also show cost improvements using the proposed policy.
Recommended citation: Rahimi, Z., Down, D. G., Li, N., Arnold, D. (2025)." Ordering Policies for Multi-Item Inventory Systems with Correlated Demands." European Journal of Operational Research.
