Echelon reorder points, installation reorder points, and the value of centralized demand information

Echelon reorder points, installation reorder points, and the value of centralized demand information

0.00 Avg rating0 Votes
Article ID: iaor2000665
Country: United States
Volume: 44
Issue: 12, Part 2
Publication Date: Dec 1998
Journal: Management Science
Authors:
Keywords: demand, information
Abstract:

We consider a serial inventory system with N stages. The material flows from an outside supplier to stage N, then to stage N – 1, etc., and finally to stage 1 where random customer demand arises. Each stage replenishes a stage-specific inventory position according to a stage-specific reorder point/order quantity policy. Two variations of this policy are considered. One is based on echelon stock, and the other installation stock. The former requires centralized demand information, while the latter does not. The relative cost difference between the two policies is called the value of centralized demand information. For fixed order quantities, we develop efficient algorithms for computing both the optimal echelon reorder points and the optimal installation reorder points. These algorithms enable us to conduct an extensive computational study to assess the value of centralized demand information and to understand how this value depends on several key system parameters, i.e., the number of stages, leadtimes, batch sizes, demand variability, and the desired level of customer service.

Reviews

Required fields are marked *. Your email address will not be published.