Optimization of (s, S) inventory policies in a distribution system with minimum and maximum joint replenishment quantity constraints

Abstract : In this paper, the inventory replenishment problem of a two-echelon distribution system of Alibaba with multiple products is studied, where the inventory of each product at each stock is controlled by a (s, S) policy and multiple products are replenished jointly with minimum and maximum joint replenishment quantity constraints. A novel scenario-based model for the optimization of the (s, S) policies in the system that takes account of all side constraints is proposed. The effectiveness of this model is demonstrated by numerical experiments on instances generated based on data of Alibaba. The numerical results show that the inventory policies found by the model can lead to lower logistics costs and higher customer service levels compared with those found by a classical method.