Managing Multiechelon Cycle Inventory

A multiechelon supply chain has multiple stages and possibly many players at each stage. The lack of coordination in lot sizing decisions across the supply chain results in high costs and more cycle inventory than required. The goal in a multiechelon system is to decrease total costs by coordinating orders across the supply chain. 

Overall supply chain inventory can be lowered if the manufacturer synchronizes its production to be ready just in time to be shipped to the retailer. In this case, the manufacturer carries no inventory and the retailer carries an average inventory of QI2. Synchronization of production and replenishment allows the supply chain to lower total cycle inventory from about 3QI2 to QI2. 

FIGURE 11-6 Inventory Profile at Retailer and Manufacturer with No Synchronization 

Integer replenishment policies can be synchronized in multiechelon supply chains to keep cycle inventory and order costs low. Under such policies, the reorder interval at any stage is an integer multiple of a base reorder interval. Synchronized integer replenishment policies facilitate a high level of cross-docking 

For customers with a shorter reorder interval than the supplier, make the supplier s reorder interval an integer mnltiple of the cnstomer s interval and synchronize replenishment at the 

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