Optimal Position-Based Warehouse Ordering in Divergent Two-Echelon Inventory Systems

: A continuous review two-echelon inventory system with a central warehouse and a number of non-identical retailers is considered. The retailers face independent Poisson demand and apply standard (R, Q) policies. We present a state dependent "order-to" policy for warehouse ordering, which is optimal in the broad class of "position-based" policies relying on complete information about the inventory positions, transportation times and cost and demand structures at all facilities. This class encompass both the traditional installation-stock and echelon-stock (R,Q) policies as well as the more sophisticated policies recently analyzed in Moinzadeh (2002) and Marklund (2002). The value of more carefully incorporating this richer information structure into the warehouse ordering policy is illustrated in a numerical study. 

• Type: Journal
• Year: 2008
• Where: IOR
• Authors: Sven Axsäter, Johan Marklund
• Keywords: IOR 2008, Policies, Review Two-echelon Inventory, Warehouse