Title: A heuristic optimisation algorithm for two-echelon (R, Q) inventory systems with non-identical retailers

Authors: Mohammad H. Al-Rifai; Manuel D. Rossetti; Alireza Sheikhzadeh

Addresses: Dentsply Sirona, 1301 Smile Way, York, PA 17404, USA ' Department of Industrial Engineering, University of Arkansas, 4207 Bell Engineering Center, Fayetteville, AR 72701 USA ' Department of Industrial Engineering, University of Arkansas, 4207 Bell Engineering Center, Fayetteville, AR 72701 USA

Abstract: This paper describes an optimisation algorithm that minimises the total inventory investment of a one warehouse and an m non-identical retailer's inventory system using reorder point and order quantity (R, Q) policies. The inventory system is subject to constraints on the average ordering frequency and number of backorders. The system is decomposed by echelon and location, and analytical expressions are derived for the inventory policy parameters. Sets of computational experiments illustrate the effectiveness of the heuristic over a wide range of problem instances. Experimental results indicate that the heuristic optimisation algorithm is an effective procedure for optimising the sampled inventory systems regarding both the quality of the solutions and the computational times. This research provides approximations and a heuristic optimisation procedure for a two-echelon inventory system for the non-identical retailer's case.

Keywords: multi-echelon inventory systems; optimisation; spare parts; non-identical retailers; heuristics; inventory investment; inventory management; ordering frequency; backorders; inventory policy.

DOI: 10.1504/IJIR.2016.080325

International Journal of Inventory Research, 2016 Vol.3 No.2, pp.166 - 193

Received: 07 Mar 2016
Accepted: 14 Jun 2016
Published online: 14 Nov 2016 *

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