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UBC Theses and Dissertations

Testing a heuristic that determines customer service level in a two-echelon inventory system Hofmann, Nadine Elisabeth


The purpose of this thesis is to test, via a GPSS simulation, a heuristic developed by B.A. Rosenbaum. The heuristic determines the level of service a customer receives in a multi-echelon inventory system. The system consists of one central Distribution Centre (DC) which is the source of supply for eight Regional Distribution Centres (RDC's), which themselves are the source of supply for customer demand. Service is defined to be the fraction of demand met from on-hand stock at the location where the order is placed. Two distinct sets of tests on the heuristic are performed in this thesis. First, a wide range of parameter values are used in the simulations to test the sensitivity of the assumptions essential in the development of the heuristic. Second, the robustness of the heuristic is examined when different assumptions are substituted in the inventory system analysed. The analysis indicates the heuristic performs fairly well under various conditions. In particular, increasing the order size or reducing the number of warehouses in the system yield calculated values predictive of the simulated results.

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