Application of Active-set Optimization Method to Solve Stochastic Optimization Problem of Supplier Selection and Inventory Control Problem

Abstract

A stochastic optimization problem that solved by using scenario approach will have a large scale deterministic equivalent optimization. In this paper, we apply the active-set optimization method to solve a stochastic optimization problem of integrated supplier selection and inventory control problem which it solved by using scenario approach or wait and see solution approach. We have solved two numerical experiments which are a small scale problem to illustrate how to determine the solution and a large scale problem to observe how the problem is solved. From the results, the active-set method is applicable for this large scale supplier selection problem considering inventory control problem from the view of the computational time.