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.
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