Comparison of echelon stock and installation stock policies with policy adjusted order quantities

Echelon stock and installation stock reorder point policies for multi-level inventory control have been compared in previous studies. It is known that echelon stock policies dominate installation stock policies for serial and assembly systems. Earlier comparisons assume that both policies use the same given order quantities, while each policy is optimized with respect to its reorder points. This paper presents worst case results for the cost ratio when the order quantities can be optimized for each policy.