Distribution and Inventory Planning in Multi-Echelon Supply Chains Under Demand Uncertainty

Distribution and inventory planning in a multi-echelon system are studied under an uncertain demand context. To deal with this problem a mixed integer linear programming (MILP) model is proposed. This considers a multi-echelon system formed by N-warehouses and M-retailers. The problem consists on determining the optimal reordering plan for the operating network, which minimises the overall system's operation cost. The uncertain demand faced by retailers is addressed by dening the optimal safety stock that guarantees a given service level at each regional warehouse and each retailer. Also, the risk pooling effect is taken into account when determining inventory levels in each entity. A case study based on a real retailer distribution chain is presented and solved.