A Practical Approach to Develop Centralized Inventory Policies for 1-Warehouse/N-Retailers Systems Through Simulation/Optimization A Practical Approach to Develop Centralized Inventory Policies for 1-Warehouse/N-Retailers Systems Through Simulation/Optimization

Abstract

Collaboration in supply chain management has become a key success factor. Operational strategies in which each node operates under optimum operating conditions have proven to be inadequate, and it has been determined that a strategy of coordination of the chain as a whole is best perceived. The One-warehouse N-retailer chain typically operates with each retailer placing orders to the warehouse according to its own inventory policies. In this article we study the case where the warehouse makes centralized decisions, defining retail inventory replenishment policies using the (R, s, S) periodic review policy. The optimal policy is determined using a heuristic that combines Monte Carlo simulation with Optimization, based on an implementation in a spreadsheet scheme. The approach is tested in one case, showing reductions in the relevant inventory costs when centralized versus decentralized approaches are compared.