Dynamic inventory replenishment with reinforcement learning in managing e-fulfilment centres

Daniel Y. MO, Y. P. TSANG, Weikun XU, Yue WANG

Research output: Chapter in Book/Report/Conference proceedingChapters

Abstract

The demand of retail e-commerce has been rapidly growing due to the digitalization and the COVID-19 pandemic, and thus, the stress on e-fulfilment services continues to increase nowadays. To fulfil daily customers’ orders, effective inventory replenishment is of the essence in order to strike a balance between inventory management costs and service level. This paper describes an enhanced inventory replenishment approach by using reinforcement learning to deal with non-stationary and uncertain demand from customers. The proposed approach relaxes the assumption of stationary demand distribution considered in typical inventory models. Conventional policies derived from such models cannot guarantee optimal re-order quantities, when demand distribution is non-stationary over time. Consequently, reinforcement learning is adopted in the proposed approach to improve feasible solutions continuously in a dynamic business environment. In comparison to the conventional base stock policy, our proposed approach provides cost saving opportunities ranging from 28.5 to 41.3% in a simulated environment. It is found that the value of using data-driven solution approaches to deal with the practical inventory management problem is effective. Copyright © 2023 The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd.

Original languageEnglish
Title of host publicationApplications of decision science in management: Proceedings of International Conference on Decision Science and Management (ICDSM 2022)
EditorsTaosheng WANG, Srikanta PATNAIK, Wu Chun Jack HO, Maria Leonilde ROCHA VARELA
Place of PublicationSingapore
PublisherSpringer
Pages313-319
ISBN (Electronic)9789811927683
ISBN (Print)9789811927676
DOIs
Publication statusPublished - 2023

Citation

Mo, D. Y., Tsang, Y. P., Xu, W., & Wang, Y. (2023). Dynamic inventory replenishment with reinforcement learning in managing e-fulfilment centres. In T. Wang, S. Patnaik, W. C. J. Ho, & M. L. Rocha Varela (Eds.), Dynamic inventory replenishment with reinforcement learning in managing e-fulfilment centres (pp. 313-319). Springer. https://doi.org/10.1007/978-981-19-2768-3_29

Fingerprint

Dive into the research topics of 'Dynamic inventory replenishment with reinforcement learning in managing e-fulfilment centres'. Together they form a unique fingerprint.