Comparison of echelon stock and installation stock policies for two-level inventory systems

It is previously known that the echelon stock reorder point policies dominate installation stock reorder point policies for serial and assembly multi-level inventory systems. This paper presents worst-case results for the relative cost difference in case of constant demand and no back orders. Furthermore, the authors analyze distribution systems with stochastic demand by simulation. Depending on the structure of the system either echelon or installation stock policies may be advantageous.