Inventories exist throughout the supply chain in various forms for various
reasons. Since carrying these inventories can cost anywhere from 20 to 40%
of their value a year, managing them in a scientific manner to maintain min
imal levels makes economic sense. This paper presents a near-optimal (s, Q)
-type inventory policy for a production/distribution network with multiple
suppliers replenishing a central warehouse, which in turn distributes to a
large number of retailers. The model is a synthesis of three components: (i
) the inventory analysis at the retailers, (ii) the demand process at the w
arehouse, and (iii) the inventory analysis at the warehouse. The key contri
bution of the model is the seamless integration of the three components to
analyze simple supply chains. The decisions in the model were made through
a comprehensive distribution-based cost framework that includes the invento
ry, transportation, and transit components of the supply chain. (C) 1999 El
sevier Science B.V. All rights reserved.