Essays on joint replenishment and multi-echelon inventory systems

Abstract: This Licentiate thesis addresses the topics of Joint Replenishment and Multi-Echelon Inventory Systems. Both are important parts in the concepts and current trends in Supply Chain Management and Logistics. The objective of Supply Chain Management is to manage the flow of information and goods from the supplier to the final customer with respect to high customer value and low costs. A common inventory and coordination problem is the so called Joint Replenishment Problem. The problem often occurs when several items are replenished at a single stocking point. This can happen in many different situations, e.g. when several items are procured from the same supplier or when a product after manufacturing, is packaged in different quantities. Cost savings can be obtained by coordinating the replenishments, compared to when items are replenished independently. Coordination of several levels in a supply chain, often referred to as multi-echelon inventory control, is another important part of Supply Chain Management. A frequently encountered problem in practice is the One-warehouse N-retailer problem, which can found in divergent distribution systems where a central warehouse supplies several retailers with goods. The thesis contains an introductory part and three research papers. The first two papers deal with the Joint Replenishment Problem and the second with the One-warehouse N-retailer problem. Paper I provides a novel heuristic method to solve joint replenishment problems using a spread-sheet technique. The principle of the recursion procedure is to find a balance between the replenishment and inventory holding costs for the different items by adjusting the replenishment frequencies. Paper II is an extension of the area and presents a new method that may help reduce peak inventory levels and arrival quantities in joint replenishment problems. The replenishments are re-scheduled during the cycle periods and if necessary individual replenishments are delayed single time periods. Paper III deals with the problem of prioritizing retailers when there is a shortage of supply at a warehouse. All customers are often not equally important and a warehouse that suffers from stock-outs may therefore want to give higher priority to some retailers when new goods are ready for delivery. The paper presents an approximation of the inventory holding and shortage cost when retailers are prioritized according to two groups, high and low priority retailers.