Optimal joint replenishment decisions for a central factory with multiple satellite factories

This study investigates the joint replenishment decisions for a central factory and its satellite factories on a Just in Time (JIT) basis. A joint replenishment program involves combining different materials/components from several satellite factories to form a large shipment delivered to the central factory, which provides an opportunity to take advantage of the strong economies of scale present in the freight cost. The program requires closely coordinating the inventory control across satellite factories of multiple materials/components. A decision model with a solution procedure is provided to find the optimal common replenishment cycle time of a group of materials/components for the central factory and the optimal production cycle time as well as the number of shipments per production cycle for each satellite factory. Based on the presented solution procedure, a decision support system has been implemented on a personal computer for the proposed decision. Numerical experiments were conducted to illustrate the application of the model.