A Staggered Ordering Policy for One-Warehouse, Multiretailer Systems

We consider a one-warehouse, N-identical-retailer model. Random demands occur at the retailers with complete backlogging. The retailers replenish their inventories from the warehouse, which in turn orders from an outside supplier with unlimited stock. Each retailer places an order every N periods according to a base-stock policy, and the reorder intervals of the retailers are staggered so that only one retailer places an order in each period. The warehouse orders according to an (s, S) policy based on its own inventory position. We consider two allocation policies, past priority allocation (PPA) and current priority allocation (CPA), which specify how the retailer orders are filled at the warehouse. For the PPA model, we provide an exact procedure for computing the long-run average total cost. Based on the exact procedure, we develop an approximate model that can be used to determine near-optimal control parameters for both the PPA and the CPA model. We conduct a computational study to test the effectiveness of the approximate model and to compare the performance of the two allocation policies.