When ful lling customer orders, on-line retailers must operate their multi-warehouse systems with great care to ensure that these orders are satis ed in a timely and cost e ective manner. We worked closely with a major on-line retailer to design an e ective and e cient ful llment system. This included establishing policies and procedures for ordering, receiving, storing and shipping of goods. Internal warehousing and transportation practices were addressed, and new approaches for managing inventories were established. In this paper we focus on one type of inventory management problem faced by the company when making daily purchasing and allocation decisions. These decisions are of two types, the positioning of inventories in their multi-echelon system and the detailed manner in which they use inventories to ful ll speci c customer orders. After reviewing some of the key attributes of models that address the two types of decision problems, we present a computationally tractable approach for solving these problems for a system that must ful ll many hundreds of thousands of orders daily.