We deal with a multi-echelon inventory system in which one warehouse supplies an item to multiple retailers. Customer demand arrives at each retailer at a constant rate. The retailers replenish their inventories from the warehouse that in turn orders from an outside supplier. It is assumed that shortages are not allowed and lead times are negligible. The goal is to determine replenishment policies that minimize the overall cost in the system. We develop a heuristic to compute efficient policies, which also can easily be used in a spreadsheet application. The main idea consists of finding a balance between the replenishment and the inventory holding costs at each installation. This new heuristic we compare with two other approaches proposed in the literature; the computational studies show that in most of the instances generated the new method provides lower costs.
This Licentiate thesis addresses the topics of Joint Replenishment and Multi-Echelon Inventory Systems. Both are important parts in the concepts and current trends in Supply Chain Management and Logistics. The objective of Supply Chain Management is to manage the flow of information and goods from the supplier to the final customer with respect to high customer value and low costs. A common inventory and coordination problem is the so called Joint Replenishment Problem. The problem often occurs when several items are replenished at a single stocking point. This can happen in many different situations, e.g. when several items are procured from the same supplier or when a product after manufacturing, is packaged in different quantities. Cost savings can be obtained by coordinating the replenishments, compared to when items are replenished independently. Coordination of several levels in a supply chain, often referred to as multi-echelon inventory control, is another important part of Supply Chain Management. A frequently encountered problem in practice is the One-warehouse N-retailer problem, which can found in divergent distribution systems where a central warehouse supplies several retailers with goods. The thesis contains an introductory part and three research papers. The first two papers deal with the Joint Replenishment Problem and the second with the One-warehouse N-retailer problem. Paper I provides a novel heuristic method to solve joint replenishment problems using a spread-sheet technique. The principle of the recursion procedure is to find a balance between the replenishment and inventory holding costs for the different items by adjusting the replenishment frequencies. Paper II is an extension of the area and presents a new method that may help reduce peak inventory levels and arrival quantities in joint replenishment problems. The replenishments are re-scheduled during the cycle periods and if necessary individual replenishments are delayed single time periods. Paper III deals with the problem of prioritizing retailers when there is a shortage of supply at a warehouse. All customers are often not equally important and a warehouse that suffers from stock-outs may therefore want to give higher priority to some retailers when new goods are ready for delivery. The paper presents an approximation of the inventory holding and shortage cost when retailers are prioritized according to two groups, high and low priority retailers.
In this paper we deal with the problem of prioritizing retailers in a two-echelon inventory system when there is a shortage of supply at the warehouse. We evaluate the performance of both the warehouse and retailers, which face Poisson demand and use a one-for-one replenishment policy.
In this paper, a heuristic method is presented which gives a novel approach to solve joint replenishment problems (JRP) with strict cycle policies. The heuristic solves the JRP in an iterative procedure and is based on a spreadsheet technique. The principle of the recursion procedure is to find a balance between the replenishment and inventory holding costs for the different items by adjusting the replenishment frequencies. The heuristic is also tested according to an extensive test template and shows pleasing results. It also performs well in comparison with many other heuristics.
In this paper, we revisit the well-known joint replenishment problem. There is a family of items with a major fixed cost associated with any replenishment of the family and a minor, (item-dependent) setup cost for each item that is included in the replenishment. In contrast with optimization methods and sophisticated (iterative) heuristics that have been presented in the literature, we present a simple (including ease of understanding) improvement routine to be used in conjunction with the original, simple approach advocated by one of the authors 30 years ago. Tests on 48,000 examples reveal that the improvement routine does, indeed, substantially improve performance and with relatively little extra computational effort. Thus, it should be of particular interest to practitioners and for teaching materials.