Model for a Two-Echelon Inventory System with Neighbor Support

A two-echelon inventory system of repairable items is considered. For the repairable items with high-value and low- demand rate that include condemnation, continuous (S-1,S) ordering strategy is adopted. Neighbor support strategy for inventory pooling is presented to obtain high service levels at a low cost. The premise of neighbor support is that it is more efficient to obtain needed stock from the nearest inventory location that has stock when the local base stocks out. Lateral as well as vertical transshipment are allowed as supplement of normal provision. Simulation algorithms are built to calculate the relevant performance measures of system. Stock optimization is implemented by genetic algorithms. Numerical experiments show that neighbor support can lead to more cost saving in comparison with emergency lateral transshipment.