Abstract
In this article a single-item inventory model for a two-echelon system made up of a warehouse and N retailers is proposed. The warehouse adopts an interval between reviews that is an integer multiple of the interval used in the retailers. The retailers apply reviews at equal, synchronized intervals. The algorithm developed for the model determines the order-up-to level at each stockpoint so that the target service-level is met at the retailer at minimal cost to the system. In order to determine how effective the proposed model was, a simulation was performed to observe the service level for an item with normal demand in a three-retailer system using order-up-to levels supplied by the proposed algorithm.
Highlights
Multi-echelon inventory systems have been the subject of study for the past four decades
This article makes two main contributions: firstly, we develop a model and describe an optimization algorithm for this model; and secondly, we develop a methodology for determining effective lead time―defined as the sum of lead time plus mean order delay caused by shortages at the warehouse― so that each retailer can be treated as an isolated problem
The simulation carried out here showed the effectiveness of the proposed model, which is an alternative solution for a common retail situation
Summary
Multi-echelon inventory systems have been the subject of study for the past four decades Interest in this type of system has arisen from, among other factors, the need to make the supply-chain network more efficient. To achieve this objective, it is essential to reduce inventory costs while maintaining an acceptable service level. The replenishment policy adopted at the stockpoints involves placing an order at each review interval T to reach the order-up-to level S. Orders placed by the retailers reach the warehouse at the same time
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