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Benefits of Multi-Echelon Inventory Control

Räntfors, Oskar (2012) MIO920
Production Management
Abstract
I
ABSTRACT
This thesis studies a two-echelon distribution inventory system with a central depot which
supplies N non-identical retailers with a single product. Stochastic customer demand
occurs solely at the retailers. The purpose of the master thesis project is to evaluate the
potential benefit of two methods in which the control of the inventory points in the
inventory system is coordinated. The two models of coordinated control are benchmarked
against a widely used single stage (uncoordinated) method.
Comparisons of the solutions produced by the methods are done using a discrete event
simulation model based on real inventory data. The effectiveness of the models are
evaluated in terms of the resulting total system cost, the... (More)
I
ABSTRACT
This thesis studies a two-echelon distribution inventory system with a central depot which
supplies N non-identical retailers with a single product. Stochastic customer demand
occurs solely at the retailers. The purpose of the master thesis project is to evaluate the
potential benefit of two methods in which the control of the inventory points in the
inventory system is coordinated. The two models of coordinated control are benchmarked
against a widely used single stage (uncoordinated) method.
Comparisons of the solutions produced by the methods are done using a discrete event
simulation model based on real inventory data. The effectiveness of the models are
evaluated in terms of the resulting total system cost, the average inventory levels, and
different types of service levels.
The simulation results clearly indicate that the evaluated methods for coordinated control
of inventories can offer considerable savings in reduced inventory levels and even, in many
cases, at the same time increasing the fill rate. The reductions in total cost range 11-37%
and an increase in fill rate accompanied by a reduction of the holding costs is observed in
most cases. Especially the holding costs at the Central Warehouse can be reduced; when
using a method for coordinated control the fill rate for orders from the retailers is 16-71%
which corresponds to a reduction of the CW holding costs of 50-94%. (Less)
Please use this url to cite or link to this publication:
author
Räntfors, Oskar
supervisor
organization
course
MIO920
year
type
M1 - University Diploma
subject
other publication id
12/5411
language
English
id
2857044
date added to LUP
2012-07-02 10:42:26
date last changed
2012-07-02 10:42:26
@misc{2857044,
  abstract     = {I
ABSTRACT
This thesis studies a two-echelon distribution inventory system with a central depot which
supplies N non-identical retailers with a single product. Stochastic customer demand
occurs solely at the retailers. The purpose of the master thesis project is to evaluate the
potential benefit of two methods in which the control of the inventory points in the
inventory system is coordinated. The two models of coordinated control are benchmarked
against a widely used single stage (uncoordinated) method.
Comparisons of the solutions produced by the methods are done using a discrete event
simulation model based on real inventory data. The effectiveness of the models are
evaluated in terms of the resulting total system cost, the average inventory levels, and
different types of service levels.
The simulation results clearly indicate that the evaluated methods for coordinated control
of inventories can offer considerable savings in reduced inventory levels and even, in many
cases, at the same time increasing the fill rate. The reductions in total cost range 11-37%
and an increase in fill rate accompanied by a reduction of the holding costs is observed in
most cases. Especially the holding costs at the Central Warehouse can be reduced; when
using a method for coordinated control the fill rate for orders from the retailers is 16-71%
which corresponds to a reduction of the CW holding costs of 50-94%.},
  author       = {Räntfors, Oskar},
  language     = {eng},
  note         = {Student Paper},
  title        = {Benefits of Multi-Echelon Inventory Control},
  year         = {2012},
}