Coordination mechanisms for inventory control in three-echelon serial and distribution systems

Abstract This paper is concerned with the coordination of inventory control in threeechelon serial and distribution systems under decentralized control. All installations in these supply chains track echelon inventories. Under decentralized control the installations will decide upon base stock levels that minimize their own inventory costs. In general these levels do not coincide with the optimal base stock levels in the global optimum of the chain under centralized control. Hence, the total cost under decentralized control is larger than under centralized control. To remove this cost inefficiency, two simple coordination mechanisms are presented: one for serial systems and one for distribution systems. Both mechanisms are initiated by the most downstream installation(s). The upstream installation increases its base stock level while the downstream installation compensates the upstream one for the increase of costs and provides it with a part of its gain from coordination. It is shown ...

• Type: Journal
• Year: 2008
• Where: ANOR
• Authors: Henk Zijm, Judith Timmer
• Keywords: ANOR 2008, Base Stock Level, Chain, Distribution Systems