Networked Base-Stock Inventory Control in Complex Distribution Systems

This paper addresses the resource distribution problem in logistic networks with a complex, multi-echelon interconnection structure. The considered class of systems encompasses two types of nodes: controlled nodes subject to inventory management decisions and sources providing goods to the system to sustain the sales. The stock gathered at the controlled nodes is used to satisfy an exogenous, uncertain demand that may be placed at any controlled node. The stock is replenished from the sources and other controlled nodes, and the flow of goods proceeds with positive lead-time delay. The network topology does not assume any structural simplifications typically considered in inventory control problems, i.e., the nodes can form a link with any other node which leads to a mesh, multi-echelon structure. The contribution of this paper is twofold: First, the classical order-up-to policy is analyzed formally with respect to such nontrivial connectivity architectures, and conditions for full demand satisfaction under any bounded demand pattern are established. Next, a networked extension of the classical policy is proposed. The introduced networked policy is shown to generate smaller holding costs while maintaining the same service level as the classical policy. The formal study is supported by numerical tests involving genetic algorithms and simulation-based optimization.