The effect of backlog queue and load-building processing in a multi-echelon inventory network

A continuous-review, two-echelon inventory system with one central warehouse and an arbitrary number of non-identical retailers is considered in this study. Retailers face independent Poisson demands and apply standard (r, Nq) policies. Filled orders at the central warehouse must be consolidated into loads before shipping to the retailer level. New modeling options for the backorder processing and load-building processes are considered. Employing simulation, a set of experiments is performed to illustrate how different processing rules for the backlogging and load-building queues affect the lead-time experienced at the retailer level. Simulation results indicate that there are cases where considerable improvements can be gained from using different processing rules in backlogging and load-building queues.