Multi-echelon Inventory System Selection: Case of Distribution Systems

Inventory management presents numerous challenges for many supply chains as they are becoming more complex and composed of multiple stages. Using appropriate multi-echelon inventory management policies allows supply chains to deliver the required level of responsiveness efficiently by optimizing inventory levels across the entire network and improving customer service levels. This paper provides a Multi-Criteria Decision Making (MCDM) approach for the multi-echelon inventory system selection problem. The scope of this paper is limited to the case of Distribution systems. The suggested approach identifies for a given supply chain configuration, a set of selection criteria related to supply chain costs and overall responsiveness. These criteria are used to compare and choose the best alternative from different multi-echelon distribution inventory system configurations by using a suitable MCDM method. Eight different multi-echelon distribution inventory system alternatives are generated. Each one is a combination of three main inventory policies: (i) replenishment policies, (ii) ordering policies, and (iii) safety stock allocation policies. The suggested approach is illustrated in the case of the pharmaceuticals products supply chain in the public sector in Morocco. Depending on the decision problem nature and other criteria, the AHP method proved to be the suitable MCDM method for selecting the best multi-echelon inventory system for the Moroccan pharmaceutical products supply chain. The analysis indicates that assigning inventory to the most downstream facilities close to patients and adopting an installation stock ordering policy implemented by a decentralized decision system is the best option for the supply chain considered in the case study.