Reference : Safety Stock Optimisation in Distribution Systems: A Comparison of Two Competing Appr...
Scientific journals : Article
Business & economic sciences : Production, distribution & supply chain management
http://hdl.handle.net/10993/30924
Safety Stock Optimisation in Distribution Systems: A Comparison of Two Competing Approaches
English
Klosterhalfen, Steffen[University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) > ; University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) > Luxembourg Centre for Logistics and Supply Chain Management (LCL)]
[en] Inventory ; Safety stock ; Multi-echelon ; Distribution ; Service level ; Simulation
[en] Contributions to multi-echelon safety stock optimisation can broadly be divided into models following either a stochastic- or guaranteed-service approach. These approaches form the basis of several commercial inventory optimisation software tools. To date, there is still a lack of a detailed comparison between the two approaches. This paper presents a cost comparison for two-stage distribution systems by means of a simulation study. The results indicate that the cost difference between the two approaches is quite small amounting to 4 at most. We observe that in most cases, the resulting (lower) internal warehouse service level is a good indicator for the superiority of an approach. The guaranteed-service approach shows a better performance for moderate flexibility costs, large warehouse processing times and high retailer service levels.
[University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) > ; University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) > Luxembourg Centre for Logistics and Supply Chain Management (LCL)]
