Modified (Q, r) policy for stochastic inventory control systems in supply chain

Abstract

In this paper, we consider a continuous review inventory control for a multi-echelon system, which is a building block for supply chain. The system consists of a warehouse, one distribution center and single retailer. A (s, S) type inventory system with Poisson demand and exponentially distributed lead times is assumed at retailer node and modified (Q, r) type inventory policy is assumed at distribution center. The distribution center replenishes its stocks with exponentially distributed lead times from warehouse which has abundant stocks for supply. Demands occurring at retailer node during the stock out periods are assumed to be lost. The items are supplied from warehouse to distribution center then to retailers in packs of Q (= S-s). The transient, steady state probability distribution of system states and the system performance measures in the steady state are obtained. Numerical examples are provided to illustrate the proposed model. © 2013 Springer.