Periodic-review policy for a 2-Echelon inventory problem with seasonal demand

Abstract

This paper studies a two-level inventory system with one warehouse and N retailers under seasonal demand. All locations apply periodic review base-stock policy with echelon stock concept. The objective is to determine an inventory policy with the minimum inventory cost respected to required service level. Three ways to determine inventory policies are proposed which are upper, lower and EOQ alternatives. Among these alternatives, it is found that upper-alternative policies tend to give the lowest cost which is around 17% lower than other policies. EOQ-alternative policies give the lowest cost in some instances with zero ordering cost. However, lower-alternative policies lead to the lower demand loss, its highest average loss in one instance is 0.07% while other policies’ loss can be as high as 0.22%.