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Most studies in multiechelon inventory systems have concentrated on understanding the specific aspects of a system's behavior. The problem of optimal policy computation has largely been ignored.In this paper, we investigate a twocchelon inventory system experiencing stochastic demand and a pull system of inven~ory allocation. Both echelons use an order-up-to-level cype control policy. A matbematical model is developed to detennine the optimal order level at all echelons and validated through simulation. Two simple algorithms to locate the optimum solution are presented. The use of graptucal tools in optimal policy calculation is also discussed.Subject Areas: Inventory Mona~ement, and b~i s t i~~ and Distribution.

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