Coordination Policies for Multi-Echelon Multi-Product Inventory Systems

Abstract

The effective coordination is a key element in the success of many cooperative supply chains. All production, distribution and supply must be adequately synchronized in order to satisfy the customer needs and at the same time optimizing the operational costs. This paper presents a multi-product, multi-echelon inventory system which comprises one manufacturer, a number of distribution centers and a number of retailers which are dependent of such distribution centers. The coordination and collaboration is achieved through a carefully designed replenishment policy. The near-optimal order quantities for each of the supply chain agents are calculated with a mathematical model in which the integrality constraints are relaxed. A number of instances were generated and tested. The results show the validity of the proposed approach.