Determining supply chain safety stock level and location
Abstract: The lean methodology
and its principles have widely been applied in supply chain management in
recent decades. Manufacturers are one of the most important contributors in a
supply chain and inventory plays a paramount role for them to become lean.
Therefore, there should be appropriate management of inventory and all of its
drivers in accordance with a lean strategy. Safety stock is one of the main
drivers of inventory; it protects against increasing the stretch in the
breaking points of the supply chain, which in turn can result in possible reduction
of inventory. In this paper an optimization model and a simulation model are
developed and applied in a real case to optimize the safety stock level with
the objective of logistics cost minimization.
Design/methodology/approach: In order to optimize the safety stock level
while minimizing logistics costs, a nonlinear cost minimization safety stock
model is developed in this paper and then it is applied in a real world
manufacturing case company. A safety stock simulation model based on appropriate
metrics in the case company’s supply chain performance is also provided.
Findings: These models result in not only the optimum levels but also
locations of safety stock within the supply chain.
Originality/value: In this research, two models of cost minimization and
simulation have been developed and also applied in a real case company to
result in not only optimized levels but also optimized locations of safety
stock across the whole supply chain. In addition, the appropriate supply chain
performance measurement metrics have been introduced in this paper and the
simulation model is developed based on those.
Author: Bahareh Amirjabbari,
Nadia Bhuiyan
Journal Code: jptindustrigg140023
