Directorate of distance education

Illustration of an Integer Replenishment Policy
If the distributor orders more frequently than the retailer, all 
shipments to the retailer are cross-docked as shown in Figure. For 
retailers ordering every four weeks, replenishment at the distributor can 
be synchronized with shipment to retailers. Thus, every four weeks, the 
distributor’s replenishment order arrives just in time to be cross-docked 
and shipped to the retailers placing orders once every four weeks as shown 
in Figure. If the distributor orders less frequently than the retailer, some 
of the retailer’s replenishment ordering every week, every second week 
the replenishment order at the distributor arrives just in time to be cross-
docked and shipped to the retailer as shown in Figure. Every other week, 
however, the replenishment order to retailers is shipped from inventory. 
Thus, half the replenishment orders are cross-docked in this case.

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Notes
198
Determinants
Considering the supply chain shown in Figure as a set of stages 
with all parties at a one stage being customers of some party at the previous 
stage and suppliers to other parties at the next stage. For such a multi-
echelon distribution supply chain, a good replenishment policy has the 
following characteristics:
➢ All parties within a stage are divided into groups such that all parties 
within a group order simultaneously from the same supplier.
➢ When a party receives a replenishment order, the receipt should 
be synchronized with the shipment of a replenishment order 
to at least one of its customers. In other words, a portion of any 
replenishment order at a stage should be cross-docked on to the 
next stage.
A Multi-Echelon Distribution Supply Chain
➢ If a customer replenishes less frequently than its supplier, the 
supplier replenishment frequency should be an integer multiple of 
the customer replenishment frequency and replenishment at both 
stages should be synchronized to facilitate cross-docking. In other 
words, a supplier should cross-dock all orders from customers who 
reorder less frequently than the supplier himself.

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Notes
199
➢ If a customer replenishes more frequently than its supplier, the 
customer’s replenishment frequency should be an integer multiple 
of the supplier’s replenishment frequency and replenishment at 
both stages should be synchronized to facilitate cross-docking. 
In other words, a supplier should cross-dock one out of every k 
shipments to a customer who orders more frequently than himself, 
where k is an integer.
➢ Thus, the relative frequency of reordering will depend upon the 
setup cost, holding cost and demand at different parties.
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Notes
200