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Keywords:

  • inventory/production;
  • multiechelon;
  • shipment consolidation;
  • continuous review;
  • stochastic;
  • Poisson demand

Abstract

This article analyses a divergent supply chain consisting of a central warehouse and N nonidentical retailers. The focus is on joint evaluation of inventory replenishment and shipment consolidation effects. A time-based dispatching and shipment consolidation policy is used at the warehouse in conjunction with real-time point-of-sale data and centralized inventory information. This represents a common situation, for example, in various types of vendor managed inventory systems. The main contribution is the derivation of an exact recursive procedure for determining the expected inventory holding and backorder costs for the system, under the assumption of Poisson demand. Two heuristics for determining near optimal shipment intervals are also presented. The results are applicable both for single-item and multiitem systems. © 2011 Wiley Periodicals, Inc. Naval Research Logistics 58: 59–71, 2011