| This thesis presents a Stochastic Integer Program (SIP) to solve a two-echelon supply chain system with demand uncertainty. The model assumes that transshipments are actively used. The model is composed of first and second-stage decision variables. The first-stage decision variables are: the location of Distribution Centres (DCs) from a fixed set of DC's, the service assignments of the opened DCs to the Demand Points (DPs) and the beginning inventory at each open DC. The second-stage decisions are made after the demand scenario of the DPs has been revealed. The decision variables in this stage are: the amount to ship from the DCs to the DPs, the amount to transship between DCs in order to satisfy excess demand, and the remaining inventory after demand has been filled. The model's objective is to minimize the costs of the inventory system while maintaining minimum service levels at both an overall and per-DP case. |
