Directorate of distance education

Inventory profile at Retailer and Manufacturer with No Synchronization
Management of Multichannel Inventory System
When a supply chain has a series or stages, the goal is to synchronize 
lot sizes at different stages in a way that no unnecessary cycle inventory is 
carries at any stage. One method of achieving synchronization in a supply 
chain with a single series of stages is to devise inventory policies that are 
nested and have stationary intervals. 
An inventory policy is nested if a particular stage S and its 
customers’ orders are synchronized such that the replenishment order 
arrives at stage S just in time for the replenishment order to be shipped to 

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a customer of stage S. stage S, however, may replenish less frequently than 
its immediate customer stage. A policy has stationary intervals if every 
stage reorders after a fixed interval of time. Following a nested policy is 
equivalent to stating that each stage has the opportunity to cross-dock at 
least a part of its replenishment order because cross-docking can occur 
when both stages are to be replenished in coordinated manner. 
For a supply chain with stages in a single series, ordering policies 
where the lot size at each stage is an integer multiple of the lot size at its 
immediate customer (a nested policy) have been shown to be quite close 
to optimal. Such an ordering policy is equivalent to having lot sizes at each 
stage be an integer multiple of the amount cross-docked on to the next 
stage; that is, one out of every k orders from the customer stage is cross-
docked where k is an integer. The extent of cross-docking will depend 
upon the ratio is between two stage, the higher the optimal percentage of 
cross-docked product.
A slightly different issue arises when one party in a supply chain 
supplies multiple parties at the next stage of the supply chain, such as 
when a distributor supplies many retailers. In this case, a nested policy is 
not very effective if some retailers have very low demand and others have 
high demand. Here it may be better for retailers with low demand to order 
less frequently than the distributor because ordering more frequently will 
increase the order cost in the supply chain. In this setting, 
Roundy (1995) has shown that retailers should be grouped such 
that all retailers in one group order together and for any retailer, either the 
ordering frequency is an integer multiple of the ordering frequency at the 
distributor or the ordering frequency is an integer multiple of the ordering 
frequency at the distributor or the ordering frequency at the distributor is 
an integer multiple of the frequency at the retailer. An example of such a 
policy is shown in Figure. 
Under this policy the distributor places a replenishment order 
every two weeks. Some retailers place replenishment orders every week and 
others place replenishment orders every two or four weeks. Observe that 
for retailers ordering more frequently than the distributor, the retailers’ 
ordering frequency is an integer multiple of the distributor’s frequency. 

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For retailers ordering less frequently than the distributor, the 
distributor’s ordering frequency is an integer multiple of the retailers’ 
frequency.