IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

Echelon Reorder Points, Installation Reorder Points, and the Value of Centralized Demand Information

  • Fangruo Chen

    (Graduate School of Business, Columbia University, New York, New York 10027)

We consider a serial inventory system with N stages. The material flows from an outside supplier to stage N, then to stage N - 1, etc., and finally to stage 1 where random customer demand arises. Each stage replenishes a stage-specific inventory position according to a stage-specific reorder point/order quantity policy. Two variations of this policy are considered. One is based on echelon stock, and the other installation stock. The former requires centralized demand information, while the latter does not. The relative cost difference between the two policies is called the value of centralized demand information. For fixed order quantities, we develop efficient algorithms for computing both the optimal echelon reorder points and the optimal installation reorder points. These algorithms enable us to conduct an extensive computational study to assess the value of centralized demand information and to understand how this value depends on several key system parameters, i.e., the number of stages, leadtimes, batch sizes, demand variability, and the desired level of customer service.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Article provided by INFORMS in its journal Management Science.

Volume (Year): 44 (1998)
Issue (Month): 12-Part-2 (December)
Pages: S221-S234

in new window

Handle: RePEc:inm:ormnsc:v:44:y:1998:i:12-part-2:p:s221-s234
Contact details of provider: Postal: 7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA
Phone: +1-443-757-3500
Fax: 443-757-3515
Web page:

More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:44:y:1998:i:12-part-2:p:s221-s234. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.