Optimization of order-up-to-S policies in two-echelon inventory systems with periodic review

Optimization of order-up-to-S policies in two-echelon inventory systems with periodic review

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Article ID: iaor19931694
Country: United States
Volume: 40
Issue: 2
Start Page Number: 245
End Page Number: 253
Publication Date: Mar 1993
Journal: Naval Research Logistics
Authors:
Abstract:

The paper considers an inventory system with one warehouse and N retailers. Transportation times are constant and the retailers face independent Poisson demand. Each facility applies a periodic review order-up-to-S policy. In case of shortages at the warehouse, orders for individual units are filled in the same order as the original demand at the retailers, i.e., according to a so-called virtual allocation scheme. Using that the considered policy is very similar to a continuous review one-for-one ordering policy, the paper is able to provide simple recursive procedures for exact evaluation of holding and shortage costs.

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