Establishing Consistent and Realistic Reorder Intervals in Production-Distribution Systems

The objective of this paper is to present a model and algorithm that can be used to find consistent and realistic reorder intervals for each item in large-scale production-distribution systems. We assume such systems can be represented by directed acyclic graphs. Demand for each end item is assumed to occur at a constant and continuous rate. Production is instantaneous and no backorders are allowed. Both fixed setup costs and echelon holding costs are charged at each stage. We limit our attention to nested and stationary policies. Furthermore, we restrict the reorder interval for each stage to be a power of 2 times a base planning period. The model that results from these assumptions is an integer nonlinear programming problem. The optimal solution can be found using the proposed algorithm, which is a polynomial time algorithm. A real world example is given to illustrate the procedure.