Safety stock placement problem in capacitated supply chains

Carles Sitompul, El Houssaine Aghezzaf*, Wout Dullaert, Hendrik Van Landeghem

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

Today's highly competitive business environment forces supply chain managers to maintain high service levels while keeping inventory-related costs as low as possible. Therefore, placing the right amount of safety stock at the right places in the supply chain is an important aspect of effective inventory management. This safety stock placement problem, for which some solution strategies have been proposed in the case of uncapacitated supply chains, becomes much more complicated when, in addition to the variability of the demand, capacity constraints also come into play. In this paper we propose a model to locate safety stocks in a capacitated supply chain with the objective of maintaining the required service level. The underlying relationships linking excess capacity, demand variability, and service levels are analysed to gain deeper understanding of the safety stock placement problem in capacitated supply chains. Based on these relationships a solution approach for the problem is proposed and is tested with Monte Carlo simulation.

Original languageEnglish
Pages (from-to)4709-4727
Number of pages19
JournalInternational Journal of Production Research
Volume46
Issue number17
DOIs
Publication statusPublished - 1 Sep 2008

Keywords

  • Capacity constraint
  • Periodic review
  • Safety stock
  • Supply chain

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