An Application of a Cost Minimization Model in Determining Safety Stock Level and Location.

Abstract

In recent decades, the lean methodology and the development of its principles and concepts have widely been applied in supply chain management. One of the most important strategies of being lean is having efficient inventory within the whole supply chain. Managing inventory efficiently requires appropriate management of safety stock in order to compensate the weakness of the supply chain for product availability.A nonlinear cost minimizationsafety stock model with the objective of minimizing the total logistics cost is developed in this paper. This modelis also applied to a real-world case company which is a manufacturer.The model results in optimum levels and locations of safety stock within the company#x2019;s supply chain in order to minimize total logistics costs.