A comparison of sample-path-based simulation-optimization and stochastic decomposition for multi-location transshipment problems

Because of its applicability, as well as its generality, research in the area of simulation-optimization continues to attract significant attention. These methods, most of which rely on the statistically motivated search techniques, are at their best when very little is known about the structure of the function (e.g., function evaluations are treated as black-box function-calls). In some applications such as the one discussed in this paper, objective function values may be obtained through linear/network flow optimization models. In such cases, the objective function may be convex, and in such circumstances, very large instances can be solved using stochastic programming techniques. This paper presents a computational case for using such techniques, whenever applicable.