(T, S) policy for coordinated inventory replenishment systems under compound Poisson demands

Abstract

This paper considers the coordinated 'periodic-review, order-up-to-level' policy, called (T, S) policy, for multi-item inventory systems. The mathematical model of (T, S) policy for single-item inventory systems is extended to the more realistic multi-item inventory systems with compound Poisson demands, positive replenishment lead times, as well as service level constraints. Numerical comparisons with 'can-order' policy (S, c, s) with different treatments show that the (T, S) policy outperforms the extensively studied (S, c, s) policy. Especially when the lead time is not too short, considerable cost reductions can be achieved through an inventory system employing the (T, S) policy.