Optimising installation (R,Q) policies in distribution networks with stochastic lead times: a comparative analysis of guaranteed- and stochastic service models |
| |
Authors: | Niels De Smet El-Houssaine Aghezzaf Bram Desmet |
| |
Affiliation: | 1. Department of Industrial Systems Engineering and Product Design (ISyEPD – EA18), Faculty of Engineering and Architecture, Ghent University, Zwijnaarde, Belgium;2. Solventure NV, Gent, Belgiumnedsmet.desmet@ugent.beniels_desmet@solventure.eu;5. Flanders Make, Lommel, Belgium;6. Solventure NV, Gent, Belgium |
| |
Abstract: | This paper studies two modelling approaches to the multi-echelon inventory optimisation problem in a distribution network with stochastic demands and lead times. It compares the performance of a novel guaranteed-service model (GSM), using an installation (R, Q) inventory control policy, with a stochastic service model (SSM) considering ordering, holding and flexibility costs. From both cycle service level and fill rate perspectives, our numerical analysis of the 1-warehouse 2-retailer network shows that cost difference between both models is driven by the internal service level at the warehouse. The GSM outperforms the SSM for over 80% of the simulated instances and realises an average total cost improvement of approximately 10%. This analysis goes against earlier results that showed a relatively low-cost difference between the two approaches, and demonstrates that it is worthwhile to evaluate competing models for multi-echelon inventory optimisation in real-world supply chains with batch ordering and variable lead times. |
| |
Keywords: | inventory control distribution systems multi-echelon guaranteed-service stochastic service |
|
|