Joint Replenishment and Base Stock Model for the U.S. Beer Industry

Abstract

The United States beer industry operates, by law, under a three-tier distribution network. MillerCoors[SAC1] has made the strategic decision to open distribution centers across the United States to handle complexity while maintaining service levels. Opening new distribution centers, and introducing a new tier to the supply chain, requires MillerCoors to define a new inventory deployment strategy to maintain their service levels to their customers. This project provides a solution to the inventory deployment problem by determining how a joint replenishment approach combined with the base stock inventory policy improves the deployment of inventory across MillerCoors supply chain. A repeatable and scalable heuristic is developed which employs joint replenishment to determine economic production frequencies and links to the base stock policy across all echelons within the supply chain. The results showed inventory reductions across 75% of all products analyzed. The results also demonstrate the importance of distribution centers to pool demand and improve alignment of inventory deployment across the supply chain.