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Exact Analysis of Continuous Review (R,Q) Policies in Two-Echelon Inventory Systems with Compound Poisson Demand

Department of Industrial Engineering, Lund University, P.O. Box 118, S-221 00 Lund, Sweden
sven.axsater{at}ie.lth.se

We consider a two-level inventory system with one central warehouse and N retailers. All installations apply different continuous review installation stock (R,Q) policies. The retailers face independent compound Poisson demand processes. Transportation times are constant. We present a method for exact evaluation of control policies that provides the complete probability distributions of the retailer inventory levels.

Subject classifications: Inventory/production, multi-echelon: batch-ordering policies, continuous review; Inventory/production, stochastic: compound Poisson demand.
History: Received January 1997; revision received March 1998; revision received January 1999; accepted April 1999.

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