Paper ID: 2112.02215

Deep Policy Iteration with Integer Programming for Inventory Management

Pavithra Harsha, Ashish Jagmohan, Jayant R. Kalagnanam, Brian Quanz, Divya Singhvi

We present a Reinforcement Learning (RL) based framework for optimizing long-term discounted reward problems with large combinatorial action space and state dependent constraints. These characteristics are common to many operations management problems, e.g., network inventory replenishment, where managers have to deal with uncertain demand, lost sales, and capacity constraints that results in more complex feasible action spaces. Our proposed Programmable Actor Reinforcement Learning (PARL) uses a deep-policy iteration method that leverages neural networks (NNs) to approximate the value function and combines it with mathematical programming (MP) and sample average approximation (SAA) to solve the per-step-action optimally while accounting for combinatorial action spaces and state-dependent constraint sets. We show how the proposed methodology can be applied to complex inventory replenishment problems where analytical solutions are intractable. We also benchmark the proposed algorithm against state-of-the-art RL algorithms and commonly used replenishment heuristics and find that the proposed algorithm considerably outperforms existing methods by as much as 14.7\% on average in various supply chain settings. This improvement in performance of PARL over benchmark algorithms can be attributed to better inventory cost management, especially in inventory constrained settings. Furthermore, in a simpler back order setting where the optimal solution is tractable, we find that the RL based policy also converges to the optimal policy. Finally, to make RL algorithms more accessible for inventory management researchers, we also discuss a modular Python library developed that can be used to test the performance of RL algorithms with various supply chain structures. This library can spur future research in developing practical and near-optimal algorithms for inventory management problems.

Submitted: Dec 4, 2021