A model for a Mixed Continuous-Periodic Review One-Warehouse, N-Retailer inventory system

Abstract This paper analyzes a Mixed Continuous-Periodic Review One-Warehouse, N-Retailer inventory system for a single, consumable item. In this system, the warehouse holds stock and the retailers experience independent, stationary field demand. Each retailer follows a continuous review (Q, r) policy. However, the warehouse reviews each retailer according to a review interval T. We discuss the motivation for this warehouse policy and show how its impact on the retailers can be modeled with an (nQ, r, T) policy at the retailers and the warehouse. Then we present an approximate analytical model to predict the performance of such a system under different operating conditions. An interesting aspect of the model is the estimation of warehouse demand variance via a closed form expression derived using renewal theory. We compare the approximate model with a simulation model to test its accuracy. The comparison indicates that the approximate model predicts quite accurately in high fill rate ranges (retailer fill rates of 90% and more). Finally, we propose several extensions to this research.

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