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Supply Chain

Multi-echelon Inventory Optimization

Girikanth Avadhanula
This is a multi-echelon inventory model and demonstrates the benefits of computing safety stock based on multi-echelon considerations rather than single-echelon calculations.The network is plant->stocking point-> Distributor-> Retailer. The mean demand of retailer is 100 and sd-30. Since the network has only one sp/one distributor/one retailer, the same demand propagates up (subject to inventory netting). You can do safety stock computations at distributor and SP based on the classical safety stock formula. Post that keep reducing the safety stock at the distributor and see if the service level is getting impacted. Do you think you can manage with SS less than what is given by the classical formula (applied at distributor and stocking point?)

Business Logistics Supply Chain

  • 7 months 2 days ago


Abhijith Neerkaje

Author: Abhijith N

Just hit the simulate button to see the simulation run. You can add displays and see the

-       Inventory States

-          Inflow

-          Out flow

For each node.

Assumption for base model:


1.       Normal stationary demand at each end node.

2.       Separate online and store demand

3.       LT between nodes can be set.

4.       Inventory policy is fixed base stock level at each node.

5.       Single item


Supply Chain

  • 2 years 10 months ago