Base-stock distributed inventory management in continuous-review logistic systems — Control system perspective

Abstract

In the paper, the dynamics of goods distribution systems managed according to the continuous-review base-stock inventory policy are investigated. As opposed to the previous studies, which limit the scope to the fundamental serial and treelike settings, a multi-echelon mesh topology of interconnected actors (suppliers, distribution center, retailers) is considered. The exogenous, uncertain demand may be imposed on any node in the controlled system, not just conveniently selected end points. The stock replenishment orders are realized with nonnegligible delay. A state-space model to study the properties of base-stock policy is proposed. The choice of control system parameters for obtaining a high service level with reduced holding costs is discussed. The analytical findings are supported by numerical tests.