Overview of a Stock Allocation Model for a Two-Echelon Push System Having Identical Units at the Lower Echelon
A two-echelon inventory system with one central warehouse and n identical regional warehouses is considered. Customer demand occurs only at the regional warehouses. A PUSH control system is used, implying that the allocation of stock is coordinated centrally. Given an initial system stock, a fixed planning horizon, and two shipping possibilities from the central warehouse until the next system replenishment (at the end of the planning horizon), the problem of deciding how much to ship initially to each warehouse is addressed. The stock retained at the central warehouse will be allocated to the branches at the second shipping opportunity so as to, if possible, balance the inventory levels, thus maximizing the customer service until the time of the next replenishment.
Given a desired customer service level, the aropriate initial system stock and the associated allocation are derived. The performance is canpared with a simple ship-all policy and with an extreme policy alla4ng a canplete redistribution of the inventory arorxg the regional warehouses at the second shipping opportunity. The results show that significant benefits can be achieved by the retention of a portion of the system stock at the central warehouse.
KeywordsInventory Level Inventory Control Safety Stock Initial Allocation Order Cycle
Unable to display preview. Download preview PDF.
- Brown, R. G., 1982, Advanced Service Parts Inventory Control (Norwich, Vermont, Materials Management Systems Inc.).Google Scholar
- Jönsson, H. and Silver, E. A., 1984, “Stock Allocation from a Central Warehouse in a Two-Location PUSH Type Inventory Gontrol System”, WP-21–84 (Faculty of Management, The University of Calgary, Calgary, Canada) — also to appear in the Proceedings of the Third International Symposium on Inventories.Google Scholar
- Jönsson, H. and Silver, E. A., 1985, “Stock Allocation Among a Gentral Warehouse and Identical Regional Warehouses in a Particular PUSH Inventory Control System”, WP-07–85 (Faculty of Management, The University of Calgary, Calgary, Canada) — also submitted to the International Journal of Production Research.Google Scholar
- E. A. Silver and R. Peterson, 1985, Decision Systems for Inventory Management and Production Planning, Second Edition, Chapter 12 and Appendix B (New York, John Wiley & Sons).Google Scholar