TRANSSHIPMENTS IN A DIVERGENT 2-ECHELON SYSTEM.

Consider a two-echelon inventory system consisting of a central depot (CD) supplying a number of retailers. Only the retailers face customer demand. Both the CD and every retailer adopt a periodic review echelon order-up-to policy, i.e., periodically an order is placed to raise the echelon inventory position to the order-up-to-level. At the CD incoming stock is allocated by using the Balanced Stock (BS) rationing policy. When the orders arrive at the retailers, an instantaneous rebalancing of the total echelon stock of the retailers takes place. This rebalancing is realized by lateral transshipments, assuming zero transshipment lead times. The used rebalancing policy is also a BS rationing policy.

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