A Globally Optimal Local Inventory Control Policy for Multistage Supply Chains

In the considered multistage supply chain, the product structure determines the organization of the network of enterprises that cooperate to manufacture end-products from raw materials. This paper proposes to describe such a multistage supply chain by a sequence of linear dynamical models with distributed delays. The assumed autonomy and information privacy of production units imposes structural constraints on production and inventory policies. Each local inventory policy is supposed to be a base-stock policy applied to the position inventory. At each stage, demand is supposed random but stationary with a known mean value. This paper shows that the collection of local inventory policies is equivalent to the global policy which minimizes the long term average cost of the whole supply chain.