• Journal of Industrial Technology
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• v.21 no.B
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• pp.37-44
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• 2001

Distribution System is considered as the most important part of SCM when the satisfaction of customer demand is considered. This paper focus on the backorder policies for stockout which is occurred in each regional distribution center of two-echelon distribution system facing stochastic demand process. Four concepts for the efficient system operation are suggested. First, at least 30% reduction of stockout is achieved by introduction of 50/25 allocation policy to distribution system. Second, transportation cost and lead-time of backorder are decreased by allowance of internal supply between regional distribution centers. Third, the frequency of emergency supply is minimized by application of Ship-up-to- expected-demand backorder policies. Finally we suggest several effective rules to select multi-internal suppliers. Simulation tests show the efficiency of our backorder policies and enhancement of customer service level.