POSITIONING SAFETY STOCK IN A ONE-WAREHOUSE MULTI-RETAILER SUPPLY CHAIN CONTROLLED BY OPTIMAL INVENTORY/DISTRIBUTION PLAN

摘要

This paper studies appropriate levels and locations of safety stock of a single product in a supply chain consisting of one centralized warehouse and multiple retailers. It is controlled by the optimal inventory/distribution plan which is obtained by solving a proposed linear programming model. Demand uncertainty is considered. The actual shipping quantity is adjusted to keep the actual inventory level as close to the recommended level in the optimal plan as possible. The suitable level and location of safety stock giving the lowest total cost are analyzed by experiments under different operating environments. The total cost comprises of lost-sale, inventory holding, and transportation costs. The experimental results show that the suitable location to carry safety stock depends on the operating environment. The safety stock should be carried at the retailers for all cases. Carrying safety stock at the warehouse is beneficial when the warehouse has no cycle stock due to lot-for-lot ordering. The suitable level of safety stock is dependent on the supply chain cost structure and can be determined by an experiment.