Multi-echelon inventory management in supply chains with uncertain demand and lead times: Literature review from an operational research perspective

Abstract Historically, the echelons of the supply chain, warehouse, distributors, retailers, etc., have been managed independently, buffered by large inventories. Increasing competitive pressures and market globalization are forcing firms to develop supply chains that can quickly respond to customer needs. To remain competitive and decrease inventory, these firms must use multi-echelon inventory management interactively, while reducing operating costs and improving customer service. The current paper reviews the literature, addressing multiechelon inventory management in supply chains from 1996 to 2005. The behaviour of the papers against demand and lead-time uncertainty is the key analysis point of the literature review presented here and it is conducted from an operational research point of view. Finally, directions for future research are suggested.

[1]  Kamran Moinzadeh,et al.  An Information Based Multiechelon Inventory System with Emergency Orders , 1997, Oper. Res..

[2]  Cheng-Liang Chen,et al.  Multi-objective optimization of multi-echelon supply chain networks with uncertain product demands and prices , 2004, Comput. Chem. Eng..

[3]  P. Jackson,et al.  Risk pooling in a two‐period, two‐echelon inventory stocking and allocation problem , 1989 .

[4]  Rolf Forsberg,et al.  Exact evaluation of (R, Q)-policies for two-level inventory systems with Poisson demand , 1997 .

[5]  P. Jackson.  Stock allocation in a two-echelon distribution system or “What to do until your ship comes in” , 1988 .

[6]  Paul H. Zipkin,et al.  Estimating the Performance of Multi-Level Inventory Systems , 1988, Oper. Res..

[7]  Kut C. So,et al.  Impact of supplier's lead time and forecast demand updating on retailer's order quantity variability in a two-level supply chain , 2003 .

[8]  Hon-Shiang Lau,et al.  Effects of a demand-curve's shape on the optimal solutions of a multi-echelon inventory/pricing model , 2003, Eur. J. Oper. Res..

[9]  D. Towill.  Industrial dynamics modelling of supply chains , 1996 .

[10]  Rambabu Kodali,et al.  Differential evolution algorithm for supply chain inventory planning , 2005 .

[11]  Roberto Verganti,et al.  Inventory management in a multi-echelon spare parts supply chain , 2003 .

[12]  Karl G. Kempf,et al.  A Model Predictive Control framework for robust management of multi-product, multi-echelon demand networks , 2003, Annu. Rev. Control..

[13]  Jongtae Rhee,et al.  Efficient inventory management in multi-echelon distribution systems , 1997 .

[14]  M. J. M. Posner,et al.  Sole versus dual sourcing in a continuous-review inventory system with lost sales , 1998 .

[15]  Ton G. de Kok,et al.  Optimal control of a divergent multi-echelon inventory system , 1998, Eur. J. Oper. Res..

[16]  Sven Axsäter,et al.  A framework for decentralized multi-echelon inventory control , 2001 .

[17]  M. Rossetti,et al.  A robustness study of a multi-echelon inventory model via simulation , 2002 .

[18]  Jing-Sheng Song,et al.  Optimal Policies for Multiechelon Inventory Problems with Markov-Modulated Demand , 2001, Oper. Res..

[19]  Sven Axsäter,et al.  Approximating general multi-echelon inventory systems by Poisson models , 1994 .

[20]  Huan Neng Chiu,et al.  A multi-echelon integrated JIT inventory model using the time buffer and emergency borrowing policies to deal with random delivery lead times , 2003 .

[21]  Johan Marklund,et al.  Decentralized inventory control in a two-level distribution system , 2000, Eur. J. Oper. Res..

[22]  de Ag Ton Kok,et al.  Distribution planning for a divergent depotless two-echelon network under service constraints , 1996 .

[23]  Wen-Yau Liang,et al.  Agent-based demand forecast in multi-echelon supply chain , 2006, Decis. Support Syst..

[24]  D. Simchi-Levi,et al.  Uniform distribution of inventory positions in two-echelon periodic review systems with batch-ordering policies and interdependent demands , 2002, Eur. J. Oper. Res..

[25]  R. W. Grubbström,et al.  The detailed coordination problem in a two-level assembly system with stochastic lead times , 2003 .

[26]  Maqbool Dada,et al.  A two-echelon inventory system with priority shipments , 1992 .

[27]  Barbara Amdur Rosenbaum,et al.  Service Level Relationships in a Multi-Echelon Inventory System , 1981 .

[28]  Sven Axsäter,et al.  Simple Solution Procedures for a Class of Two-Echelon Inventory Problems , 1990, Oper. Res..

[29]  Ashis Kumar Chatterjee,et al.  Echelon stock based continuous review (R,Q) policy for fast moving items , 2004 .

[30]  Rommert Dekker,et al.  The break quantity rule's effect on inventory costs in a 1-warehouse, N-retailers distribution system , 1998 .

[31]  Pierpaolo Pontrandolfo,et al.  A fuzzy echelon approach for inventory management in supply chains , 2003, Eur. J. Oper. Res..

[32]  Tetsuo Iida,et al.  The infinite horizon non-stationary stochastic multi-echelon inventory problem and near-myopic policies , 2001, Eur. J. Oper. Res..

[33]  Rajesh Piplani,et al.  Simulation workbench for analysing multi‐echelon supply chains , 2003 .

[34]  Herbert E. Scarf,et al.  Optimal Policies for a Multi-Echelon Inventory Problem , 1960, Manag. Sci..

[35]  Kamran Moinzadeh,et al.  A Multi-Echelon Inventory System with Information Exchange , 2002, Manag. Sci..

[36]  Alain Martel,et al.  Policies For Multi-Echelon Supply: Drp Systems With Probabilistic Time-Varying Demands , 2003 .

[37]  Matthieu van der Heijden,et al.  Multi-echelon inventory control in divergent systems with shipping frequencies , 1999, Eur. J. Oper. Res..

[38]  Mohammad Reza Akbari Jokar,et al.  Cost evaluation of a two-echelon inventory system with lost sales and approximately Poisson demand , 2006 .

[39]  Panos Seferlis,et al.  A two-layered optimisation-based control strategy for multi-echelon supply chain networks , 2003 .

[40]  L. B. Schwarz,et al.  Fill-Rate Optimization in a One-Warehouse N-Identical Retailer Distribution System , 1985 .

[41]  Sven Axsäter.  Scaling down multi-echelon inventory problems , 2001 .

[42]  W. H. Hausman,et al.  Optimal centralized ordering policies in multi-echelon inventory systems with correlated demands , 1990 .

[43]  Patrik Alfredsson,et al.  Modeling emergency supply flexibility in a two-echelon inventory system , 1999 .

[44]  Peter Köchel,et al.  Simulation-based optimisation of multi-echelon inventory systems , 2005 .

[45]  Matthieu van der Heijden,et al.  Inventory control in multi-echelon divergent systems with random lead times , 1996 .

[46]  K. Moinzadeh,et al.  Batch size and stocking levels in multi-echelon repairable systems , 1986 .

[47]  Awi Federgruen,et al.  Computational Issues in an Infinite-Horizon, Multiechelon Inventory Model , 1984, Oper. Res..

[48]  Beatriz Abdul-Jalbar,et al.  Single cycle policies for the one-warehouse N-retailer inventory/distribution system , 2006 .

[49]  Yunzeng Wang,et al.  A Two-Echelon Repairable Inventory System with Stocking-Center-Dependent Depot Replenishment Lead Times , 2000 .

[50]  H. Wee,et al.  Integrated inventory model for deteriorating items under a multi-echelon supply chain environment , 2003 .

[51]  Roman Kapuscinski,et al.  Optimal Policies for a Capacitated Two-Echelon Inventory System , 2004, Oper. Res..

[52]  Douglas J. Thomas,et al.  Coordinated supply chain management , 1996 .

[53]  Craig C. Sherbrooke,et al.  Metric: A Multi-Echelon Technique for Recoverable Item Control , 1968, Oper. Res..

[54]  Sven Axsäter,et al.  A joint replenishment policy for multi-echelon inventory control , 1999 .

[55]  Chingping Han,et al.  Stochastic modeling of a two‐echelon multiple sourcing supply chain system with genetic algorithm , 2005 .

[56]  Beatriz Abdul-Jalbar,et al.  Integer-ratio policies for distribution/inventory systems , 2005 .

[57]  Graham K. Rand,et al.  Inventory Management and Production Planning and Scheduling (Third Edition) , 2001, J. Oper. Res. Soc..

[58]  C. Pantelides,et al.  Design of Multi-echelon Supply Chain Networks under Demand Uncertainty , 2001 .

[59]  Sven Axsäter.  Approximate Optimization of a Two-Level Distribution Inventory System , 2003 .

[60]  Paul van Beek,et al.  Modelling and simulating multi-echelon food systems , 2000, Eur. J. Oper. Res..

[61]  Hau L. Lee,et al.  Optimal Policies and Approximations for a Serial Multiechelon Inventory System with Time-Correlated Demand , 2003, Oper. Res..

[62]  David F. Pyke.  Priority repair and dispatch policies for reparable-item logistics systems , 1990 .

[63]  Rommert Dekker,et al.  On the use of break quantities in multi--echelon distribution systems , 1995 .

[64]  Eb Erik Diks,et al.  A two-echelon inventory system with supply lead time flexibility , 2003 .

[65]  Fangruo Chen.  Worst-case analysis of (R, Q) policies in a two-stage serial inventory system with deterministic demand and backlogging , 1999, Oper. Res. Lett..

[66]  George Liberopoulos,et al.  Tradeoffs between base stock levels, numbers of kanbans, and planned supply lead times in production/inventory systems with advance demand information , 2005 .

[67]  David K. Smith,et al.  A two-echelon inventory model with lost sales , 2007, Eur. J. Oper. Res..

[68]  Surendra M. Gupta,et al.  A multi-echelon inventory system with returns , 1998 .

[69]  Andrei Sleptchenko,et al.  Effects of finite repair capacity in multi-echelon, multi-indenture service part supply systems , 2002 .

[70]  Gudrun P. Kiesmüller,et al.  Evaluation of divergent N-echelon (s,nQ)-policies under compound renewal demand , 2004, OR Spectr..

[71]  Marshall L. Fisher,et al.  Supply Chain Inventory Management and the Value of Shared Information , 2000 .

[72]  S. Minner.  Multiple-supplier inventory models in supply chain management: A review , 2003 .

[73]  Janis Grabis,et al.  Application of multi-steps forecasting for restraining the bullwhip effect and improving inventory performance under autoregressive demand , 2005, Eur. J. Oper. Res..

[74]  A. F. Veinott,et al.  Optimal policy for a dynamic multi‐echelon inventory model , 1966 .

[75]  Craig C. Sherbrooke,et al.  Optimal Inventory Modeling of Systems: Multi-Echelon Techniques (INTL SERIES IN OPERATIONS RESEARCH & MANAGEMENT SCIENCE) , 1992 .

[76]  R. Ganeshan.  Managing supply chain inventories: A multiple retailer, one warehouse, multiple supplier model , 1999 .

[77]  S. Graves.  A multiechelon inventory model with fixed replenishment intervals , 1996 .

[78]  Srinivas Bollapragada,et al.  Centralized ordering and allocation policies in a two-echelon system with non-identical warehouses , 1998, Eur. J. Oper. Res..

[79]  Ashis Kumar Chatterjee,et al.  Leveraging information in multi-echelon inventory systems , 2004, Eur. J. Oper. Res..

[80]  Cheng-Liang Chen,et al.  Optimization of Multi-Echelon Supply Chain Networks with Uncertain Sales Prices , 2004 .

[81]  Wei-yu Kevin Chiang,et al.  Production, Manufacturing and Logistics Managing inventories in a two-echelon dual-channel supply chain , 2005 .

[82]  Moncer Hariga.  A single-period, multi-echelon stochastic model under a mix of assemble to order and assemble in advance policies , 1998 .

[83]  Kamran Moinzadeh,et al.  ORDER EXPEDITION IN MULTI-ECHELON PRODUCTION/DISTRIBUTION SYSTEMS , 1994 .

[84]  Sven Axsäter,et al.  Exact Analysis of Continuous Review (R, Q) Policies in Two-Echelon Inventory Systems with Compound Poisson Demand , 2000, Oper. Res..

[85]  Linus Schrage,et al.  “Centralized Ordering Policies in a Multi-Warehouse System with Lead Times and Random Demand” , 2004 .

[86]  Edward A. Silver,et al.  Analysis of a two-echelon inventory control system with complete redistribution , 1987 .

[87]  Søren Glud Johansen.  Base-stock policies for the lost sales inventory system with Poisson demand and Erlangian lead times , 2005 .

[88]  Mark A. Turnquist,et al.  A two-echelon inventory allocation and distribution center location analysis , 2001 .

[89]  Steven Nahmias,et al.  Optimizing inventory levels in a two-echelon retailer system with partial lost sales , 1994 .