Abstract
The supply chain management has received a lot attention these years since the industry environment has transformed from the vertical integration to horizontal collaboration. Such a transformation and market competition also increase the complexity of interactions within supply chains, especially the processes for dynamic demand. The competitive power of a supply chain depends on its weakest part. That is, the bottleneck decides its performance. It is necessary to take the whole supply chain into consideration instead of optimizing it separately. Although the distribution system connects the supply and demand, few research works have discussed about the integrated distribution models. The most existing models emphasis on the mathematical optimization and allocation within its own system. Although it has greatly simplified the model complexity and saved a lot of computation efforts, it is not capable to deal with the dynamic demand today. The purpose of this research is to build a rule based heuristic distribution model that takes the constraints of supply and demand altogether to obtain the maximum and steady customer service level under the minimum costs (inventory). This model also employs some practical policies such as vendor managed inventory and segmentation rules to reduce the market uncertainty. A two-phase allocation methodology is then employed to optimize the model. Verification of this model will conduct through the i2 factory plannerO system. In addition, this research will make introductions to the issues of supply chain management and distribution systems.