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Inventory management in distribution systems - case of an Indian FMCG company

Managing inventory in distribution systems involves taking decisions on the quantity of inventory to be placed at different stages so that a desired customer service level can be achieved at minimum cost. In this paper, we present the case of the distribution system of an Indian FMCG company, which despite having centralized control takes replenishment decisions based on local stock information. The objective of the study is to develop single period representative models based on installation stock and echelon stock, and show by simulation that had the company taken decisions based on system stock information, it would have saved money in terms of investment in inventory.