Location-Based Policies
When you have multiple warehouses or retail locations, each has different demand patterns, lead times, and priorities. Create location-specific policies for optimal results.
Why Different Policies Per Location?
Same product, different locations = different demand:
EXAMPLE: Blue T-Shirt
Berlin (Main warehouse):
├─ Demand: 60 units/day (60% of total)
├─ Lead time: 5 days (local shipment)
├─ Role: Fulfillment center
└─ Strategy: High stock, frequent orders
Munich (Retail store):
├─ Demand: 25 units/day (25% of total)
├─ Lead time: 7 days (from warehouse)
├─ Role: Direct sales
└─ Strategy: Medium stock, less frequent
Hamburg (Small retail):
├─ Demand: 15 units/day (15% of total)
├─ Lead time: 7 days (from warehouse)
├─ Role: Retail presence
└─ Strategy: Low stock, on-demand
→ SAME PRODUCT, THREE DIFFERENT POLICIES
Policy Structure for Multiple Locations
Centralized Supply (Single Supplier, Split Orders)
Warehouse receives bulk order from supplier, distributes to locations:
Supplier
↓
Berlin Warehouse (Restock point: 500 units)
├─→ Munich Store (Restock point: 150 units)
├─→ Hamburg Store (Restock point: 100 units)
└─→ Customer fulfillment (100 units/day)
Policies:
├─ Berlin: When to order from SUPPLIER
│ Calculation: Total demand from all locations
│ ReorderPoint: (45 × 100) + 100 = 4,600 units
│ (45-day supplier lead time, 100 units/day total)
│
├─ Munich: When to order from BERLIN
│ Calculation: Only Munich demand
│ ReorderPoint: (7 × 25) + 25 = 200 units
│ (7-day warehouse lead time, 25 units/day)
│
└─ Hamburg: When to order from BERLIN
Calculation: Only Hamburg demand
ReorderPoint: (7 × 15) + 15 = 120 units
(7-day warehouse lead time, 15 units/day)
Decentralized Supply (Each Location Orders from Supplier)
Each location orders independently from supplier:
Supplier
├─→ Berlin Warehouse
├─→ Munich Store
└─→ Hamburg Store
Policies:
├─ Berlin: (45 × 60) + 90 = 2,790 units
│ (60 units/day, 45-day lead time, 15 days safety)
│
├─ Munich: (45 × 25) + 37 = 1,162 units
│ (25 units/day, 45-day lead time, 15 days safety)
│
└─ Hamburg: (45 × 15) + 22 = 697 units
(15 units/day, 45-day lead time, 15 days safety)
Total monthly investment: Could be higher due to separate MOQs
Real Multi-Location Example
Company: Fashion retailer, 3 locations
Product: Blue T-Shirt
Demand split: Berlin 50%, Munich 35%, Hamburg 15%
Step 1: Calculate Location Demands
TOTAL COMPANY DEMAND:
├─ Total daily: 100 units
├─ Total monthly: 3,000 units
└─ Total yearly: 36,500 units
BERLIN WAREHOUSE:
├─ Daily: 50 units (50%)
├─ Monthly: 1,500 units
└─ Annual: 18,250 units
MUNICH STORE:
├─ Daily: 35 units (35%)
├─ Monthly: 1,050 units
└─ Annual: 12,775 units
HAMBURG STORE:
├─ Daily: 15 units (15%)
├─ Monthly: 450 units
└─ Annual: 5,475 units
Step 2: Set Location-Specific Policies
BERLIN (Warehouse, Grade A - High Priority)
Lead time: 30 days (supplier delivery)
Daily demand: 50 units
Safety days: 12 (warehouse, high priority)
Reorder Point:
├─ Lead time impact: 30 × 50 = 1,500 units
├─ Safety stock: 50 × 12 = 600 units
└─ REORDER POINT: 2,100 units
Reorder Quantity: 50 × 7 × 4 weeks = 1,400 units
Min-Max:
├─ MINIMUM: 2,100 units
├─ MAXIMUM: 3,500 units
└─ Policy: Order from supplier when ≤ 2,100
Check frequency: Daily (warehouse critical)
MUNICH (Retail Store, Grade B - Medium Priority)
Lead time: 5 days (from Berlin warehouse)
Daily demand: 35 units
Safety days: 8 (retail standard)
Reorder Point:
├─ Lead time impact: 5 × 35 = 175 units
├─ Safety stock: 35 × 8 = 280 units
└─ REORDER POINT: 455 units
Reorder Quantity: 35 × 7 × 3 weeks = 735 units
Min-Max:
├─ MINIMUM: 455 units
├─ MAXIMUM: 1,190 units
└─ Policy: Order from Berlin when ≤ 455
Check frequency: Every 2 days (retail)
HAMBURG (Retail Store, Grade C - Lower Priority)
Lead time: 5 days (from Berlin warehouse)
Daily demand: 15 units
Safety days: 5 (small store, lower priority)
Reorder Point:
├─ Lead time impact: 5 × 15 = 75 units
├─ Safety stock: 15 × 5 = 75 units
└─ REORDER POINT: 150 units
Reorder Quantity: 15 × 7 × 3 weeks = 315 units
Min-Max:
├─ MINIMUM: 150 units
├─ MAXIMUM: 465 units
└─ Policy: Order from Berlin when ≤ 150
Check frequency: Weekly
Step 3: How It Works Monthly
SCENARIO: November
Nov 1: All locations at maximum
├─ Berlin: 3,500 units
├─ Munich: 1,190 units
├─ Hamburg: 465 units
└─ Total: 5,155 units
Nov 5: Munich hits reorder point
├─ Munich inventory: 450 units (below 455 threshold)
├─ Action: Order 735 units from Berlin
├─ Berlin ships from stock
└─ Berlin inventory: 3,500 - 735 = 2,765 units
Nov 10: Hamburg hits reorder point
├─ Hamburg inventory: 148 units (below 150 threshold)
├─ Action: Order 315 units from Berlin
├─ Berlin ships from stock
└─ Berlin inventory: 2,765 - 315 = 2,450 units
Nov 12: Berlin hits reorder point
├─ Berlin inventory: 2,090 units (below 2,100 threshold)
├─ Action: Order 1,400 units from SUPPLIER
├─ Expected arrival: Dec 12 (30-day lead time)
└─ Status: Ordered from supplier
Nov 15: Munich receives order
├─ Munich inventory: 450 + 735 = 1,185 units
├─ Status: Back to healthy
Nov 18: Hamburg receives order
├─ Hamburg inventory: 148 + 315 = 463 units
├─ Status: Back to healthy
Dec 12: Berlin receives supplier order
├─ Berlin inventory: 2,090 + 1,400 = 3,490 units
├─ Status: Back to healthy
Result:
✓ All locations maintain healthy inventory
✓ No stockouts
✓ Efficient ordering (batched where possible)
✓ Capital optimized
Transfers Between Locations
When one location overstock and another understocks, transfer instead of ordering:
PROBLEM:
├─ Munich inventory: 1,100 units (above max 1,190, but close)
├─ Hamburg inventory: 80 units (below min 150, critical!)
└─ Solution: Transfer from Munich to Hamburg
TRANSFER:
├─ Quantity: 100 units
├─ From: Munich
├─ To: Hamburg
├─ Cost: Shipping €20/unit × 100 = €2,000
│
│ vs. ORDERING NEW:
├─ Quantity: 315 units (Hamburg's reorder qty)
├─ Cost: €15/unit × 315 = €4,725 (goods + shipping)
│
└─ SAVE: €2,725 by transferring instead of ordering!
ACTION: Do the transfer
Transfer decision tree:
Does location A have excess?
├─ YES → Continue
└─ NO → Skip transfer, regular order
Is transfer cost < ordering cost?
├─ YES → Do transfer
└─ NO → Regular order instead
Can transfer arrive before stockout?
├─ YES → Do transfer
└─ NO → Regular order + expedite if needed
Policy Adjustments for Seasonal Demand
Product: Winter Jacket
Demand shift: 2 units/day (off-season) → 8 units/day (peak)
Off-Season Policy (Apr-Sep)
BERLIN:
├─ Daily: 1 unit
├─ Lead time: 45 days
├─ Safety: 5 days (low season)
├─ Min-Max: (45×1+5) = 50 to 80 units
MUNICH:
├─ Daily: 0.7 units
├─ Lead time: 5 days
├─ Safety: 4 days
├─ Min-Max: (5×0.7+2.8) = 6 to 15 units
HAMBURG:
├─ Daily: 0.3 units
├─ Lead time: 5 days
├─ Safety: 3 days
├─ Min-Max: (5×0.3+0.9) = 2 to 6 units
Peak-Season Policy (Oct-Dec)
BERLIN:
├─ Daily: 4 units
├─ Lead time: 45 days
├─ Safety: 14 days (high season)
├─ Min-Max: (45×4+56) = 236 to 376 units
MUNICH:
├─ Daily: 2.8 units
├─ Lead time: 5 days
├─ Safety: 10 days
├─ Min-Max: (5×2.8+28) = 42 to 98 units
HAMBURG:
├─ Daily: 1.2 units
├─ Lead time: 5 days
├─ Safety: 8 days
├─ Min-Max: (5×1.2+9.6) = 15 to 30 units
Action: Switch policies August 15 (before Oct peak)
FAQ
Q: Should each location have different safety stock days?
A: Yes. Warehouse (central) usually lower. Retail stores higher (protect against local surges).
Q: What if lead time from supplier to Munich is different than to Hamburg?
A: Absolutely different reorder points. Use actual lead times for each location.
Q: Can I use transfers to handle seasonal changes?
A: Yes, but carefully. Better to adjust reorder points before peak season. Transfers are for emergencies.
Q: Should I centralize or decentralize ordering?
A: Centralized (warehouse orders, distributes) usually more efficient. Decentralized easier if locations are far apart.
Q: How often should I review location policies?
A: Quarterly minimum. Adjust if demand patterns change ±20%.
Next Steps
- Map your locations and demand percentages
- Calculate lead times for each route
- Set location-specific min-max levels
- Implement and monitor for 2 months
- Adjust based on results
Related Articles
- Reorder Points & Safety Stock — Calculation details
- Min-Max Inventory Levels — Min-Max system
Questions?
Contact support@synplex.io for help with multi-location policies.