On Practical Use of Information in Multi-Echelon Inventory System about the Effect and Limit

Abstract

This paper treats the effect and limit of practical use of information in multi-echelon inventory system with periodical replenishment. That is, we consider a case when the replenishing volume in every inventory stage is determined using the demand information without delay (a parallel type), and comparing it with conventional case (a series type), to get the following results. When the demand distribution is stationary, the average inventory volume of the parallel type is equivalent to that of the series type, and when the demand distribution changes, the parallel type is superior to the series type in adaptation. We make it clear and formalize the reason. We also propose an adaptive inventory system reflecting the change of demand distribution, and verify the effectiveness. Finally, we point out the importance of simplification of the structure by showing the decreasing rate of the inventory when inventory stage gets fewer from 3 to 2.