Economic ordering policy for deterministic two-echelon distribution systems

In this paper an algorithm is suggested for determining the economic ordering policy for a product procured centrally by a supplier and distributed from a central warehouse to a number of retailers. The product is subsequently distributed to customers from the retailers. The objective is to minimize the total costs of the supplier resulting from the ordering costs, the distribution costs and the inventory carrying costs of the central warehouse and the retailers. An example is given to illustrate the method.