Abstract
The purpose of this paper is to determine the optimum lot-sizes and re-order intervals of a 3-echelon supply chain system. The mathematical model is built based on Roundy's PO2 policy and integer policy of ordering as a constrained non-linear programming problem. For illustration purpose, we took two problems of single and fifty products distribution systems under deterministic condition. Problems are solved with exhaustive search method on spreadsheet and through Matlab programming. Though PO2 policy is very simple and is able to provide a few solutions, and faster, many times it fails to find an optimal solution and sometimes, any feasible solution at all. On the contrary, integer policy gives many including optimum and all PO2 solutions. Result shows that our proposed model and the simple algorithm applied for the solution have superiority and is effective on reducing the total cost of the multi-product, multi-echelon inventory system. Further, the products are grouped based on reorder interval using joint replenishment strategy.
Published Version
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