Near cost-optimal inventory control policies for divergent networks under fill rate constraints

We deal with the optimisation of stock levels in general divergent networks under a periodic review, order-up-to (R, S) policy. The goal is to attain target fill rates, while the total holding costs in the entire network are minimised. To this end, we first present a method for the fast calculation of the control parameters, given central and intermediate stock levels. Next we develop an approximate procedure to determine stock levels sequentially. Extensive numerical experimentation shows that this procedure yields satisfactory results. It also shows that significant stocks at intermediate stockpoints are only useful if unit holding costs in these stockpoints are considerably less than in the end stockpoints that deliver directly to the final customers. (C) 2000 Elsevier Science B.V. All rights reserved.