An Algorithm for Determining Optimum Stock Levels in a Multi-Echelon Inventory System.

Many mathematical models for controlling inventory were developed during the past decade. One of the models, called METRIC, was designed specifically for Air Force use in determining appropriate base and depot inventory levels for a class of items called recoverable items. METRIC can be used in three ways in determining stock levels for these items. First, the model can be used to assist in the initial procurement-allocation problem. The objective is to determine both base and depot stock levels so that the sum of the expected backorders is minimized over all recoverable items at all bases having a particular weapon system, where the optimization is performed subject to a constraint on system investment. Second, METRIC can be used to redistribute stocks in an optimal manner. The objective in the redistribution problem is to find base and depot stock levels for each item that minimizes the expected total base backorders, given the available system stock. Last, the model can be used as an analysis tool. It can be used to assess system performance and investment cost for any distribution of assets. The objective of this report is to present an algorithm that can be used to obtain the solution to the redistribution problem. Author