Statistical Inventory Management in Two-Echelon, Multiple-Retailer Supply Chain Systems

Members of supply chain carry inventory for different purposes. To effectively reduce the cost of inventory, information sharing mechanism is the key. The inventory can be managed in two ways in supply chain systems. The first one is the centralized inventory management system, in which, the information of inventory is highly exchanged among supply chain members. The other is the decentralized supply chain system. This paper aims at the decentralized inventory management systems with one supplier and multiple retailers. Only partial inventory information is shared and each member in the supply chain can select their own inventory replenishment policies. Simulation models have been built to simulate these scenarios with the demand variation and market share changes at the retailer side considered. In addition to the traditional replenishment method, e.g. lot size-reorder point (s, Q) model, and periodic review (R, S) model, the statistical inventory management techniques have been applied and compared. Based on lower inventory levels, higher fill-up rate, and higher turnover rate, practical suggestions for inventory management are given to both of the upstream and the lower stream of supply chain.