AN INVENTORY MODEL FOR OPTIMIZATION OF A TWO-ECHELON PERIODIC-REVIEW SYSTEM
Keywords:inventory model, warehouse, service level, retail
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.
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