The optimal and heuristic solutions of a distribution network

Competitive environment of global networking and customization call for cost reduction in arborescent (tree-like) inventory system. One of the keys to cost reduction is the integration of the supply chain. Much practical research has been done in the area of integrating the inventory system in recent years. Integration involves the joint decision making among the producer, the distributors and the retailers in the supply chain. By revising Goyal's model, an optimal solution is derived in this paper. A heuristic solution model is also developed for a producer–distributor–-retailers inventory system using the principle of strategic partnership. Numerical results indicate the heuristic solution is a good estimation of the optimal solution.