APPROXIMATING GENERAL MULTIECHELON INVENTORY SYSTEMS BY POISSON MODELS

We consider a continuous review two-level inventory system with a cent ral warehouse and a number of retailers. The demand processes at the r etailers are different compound Poisson processes. We present and eval uate an approximate optimization technique, where the real demand is r eplaced by ''equivalent'' Poisson demand such that the ratio between m ean and standard deviation is the same as for the real distribution. T he solution of the Poisson model is then scaled back to the original p roblem.