A modeling on the multi-echelon inventory system with correlation between retailers���demands

An inventory model where the demands to the retailers are correlated with each other is considered. It is common, because of the fashion or the seasonal factors, that customers are likely to prefer buying some products at the similar moment, which may result in the correlation between the demands of retailers. In this research, we consider a twoechelon inventory model with one external supplier, one warehouse and two retailers. We derive the demand process to the warehouse and conduct experiments by simulations to characterize the effect of correlated demands on the inventory of the warehouse. It is concluded that higher inventory level is required to keep the stockout probability low when there exists positive correlation between the demands of the retailers