Replenishment in a Multi-echelon Channel Environment
Chapter 8 was concerned with a discussion of statistical inventory management in an independent demand environment where items are stocked at a single facility. Many firms, however, must contend with the planning and deployment of items in a multi-echelon distribution channel. Perhaps the critical characteristics of supply channel planning is the fact that items are stocked at more than one geographical facility and that many of the facilities are dependent on one or more supplying facilities in the channel for replenishment. Distribution network structures are expressed in much the same manner as production bills of material (BOMs). Facility dependencies are linked by echelon (level) to their respective parent supplying facilities that, in turn, may be dependent on still higher echelons of facilities for resupply. The highest echelon in the structure is the supplier or product manufacturer. When independent company supply chains are linked to other company supply chains, they become multi-company networks and are at the center of supply chain inventory management.
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