A two-echelon inventory/distribution system with power demand pattern and backorders

This paper addresses the implications of considering power demand pattern and backorders in the one-warehouse N-retailer problem. Specifically, we assume that items at the retailers are withdrawn from the inventory following a power pattern. The objective function consists of the sum of ordering, holding and backordering costs at all installations. This objective function depends on the class of inventory policies that we choose for the formulation of the problem. In general, obtaining the cost function is an arduous task since the average inventory at the warehouse could be difficult to determine. However, if we apply single-cycle policies the computation of the total average cost becomes possible. Under these assumptions we show that the one-warehouse N-retailer system with power demand pattern and backorders can be formulated as a mixed non linear programming problem.