Title: Distribution and inventory planning in multi-echelon supply chains under demand uncertainty

Authors: Joaquim Jorge Vicente; Susana Relvas; Ana Paula Barbosa-Póvoa

Addresses: CEG-IST – Centre for Management Studies, Instituto Superior Técnico, Universidade de Lisboa, Avenida Rovisco Pais, 1049-001 Lisboa, Portugal ' CEG-IST – Centre for Management Studies, Instituto Superior Técnico, Universidade de Lisboa, Avenida Rovisco Pais, 1049-001 Lisboa, Portugal ' CEG-IST – Centre for Management Studies, Instituto Superior Técnico, Universidade de Lisboa, Avenida Rovisco Pais, 1049-001 Lisboa, Portugal

Abstract: Distribution and inventory planning in a multi-echelon system are studied under an uncertain demand context. To deal with this problem a mixed integer linear programming (MILP) model is proposed. This considers a multi-echelon system formed by N-warehouses and M-retailers. The problem consists on determining the optimal reordering plan for the operating network, which minimises the overall system's operation cost. The uncertain demand faced by retailers is addressed by defining the optimal safety stock that guarantees a given service level at each regional warehouse and each retailer. Also, the risk pooling effect is taken into account when determining inventory levels in each entity. A case study based on a real retailer distribution chain is presented and solved.

Keywords: supply chain management; inventory planning; mixed integer linear programming; MILP; guaranteed service approach; demand uncertainty; risk pooling.

DOI: 10.1504/IJOR.2023.128543

International Journal of Operational Research, 2023 Vol.46 No.1, pp.93 - 117

Accepted: 08 Mar 2020
Published online: 26 Jan 2023 *