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Optimal and Heuristic Echelon (r; nQ; T) Policies In Serial Inventory Systems With Fixed Costs

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Executive Summary

This paper studies a periodic-review, serial inventory system in which echelon (r; nQ; T) policies are implemented. Under such a policy, each stage reviews its inventory in every T period and orders according to an echelon (r;nQ) policy. Two types of fixed costs are considered; one is associated with each order batch Q, and the other is incurred for each inventory review. The objective is to find the policy parameters such that the average total cost per period is minimized. This paper provides a method to obtain heuristic and optimal policy parameters.

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