Empirical study of a new procedure for allocating safety stock in a wholesale inventory system

A periodic review, single-item control model for a wholesale system that consists of one warehouse and N stores is considered. Schneider, Rinks and Keller have developed a methodology that yields approximately optimal (s,S) policies for managing such an inventory environment as a coordinated system. In this paper an extensive empirical study to test the approximations of the Schneider et al. model is presented. The focus of the paper is on developing general guidelines concerning the effect that system parameters have on the optimal service level at the warehouse.