The optimization of inventory at a single warehouse is subject to relatively manageable influencing factors in the local system. However, within a network, each node, or warehouse, must be taken into consideration. These individual network locations often have their own local system in place.
This issue, coupled with a lack of transparency, often leads to the following situation: a regional distribution center makes a stock decision without considering the inventory situation at the beginning of the supply chain, a factor that is actually quite relevant for the overall optimization of stock within the network. The same holds true for the downstream nodes in the supply chain. All too often, a central warehouse will make decisions based on overall demand history, rather than using the known demand from local warehouses. This lack of information is one of the main reasons for the Bullwhip-Effect.