Evaluation of One-for-One Replenishment Policies for Multiechelon Inventory Systems

Abstract

This paper is concerned with multiechelon inventory systems, where each demand triggers a separate order (one-for-one replenishment policies). The exogenous demands are independent Poisson processes. The transit times between locations may be stochastic. The way we model these transit times follows closely the standard treatment of stochastic leadtimes in single-location models. This is different, however, from the usual approach in the multiechelon setting (e.g., METRIC). We describe simple methods for computing or approximating the steady-state behavior of the system. The results show that, in sharp contrast to prior multiechelon models, transit-time variances play an important role in system performance.

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