A normal approximation model for safety stock optimization in a two-echelon distribution system

Safety stock optimisation in two-echelon assembly systems: normal approximation models

“…which is the same result derived in Desmet et al (2009) for a distribution system. A comparable way of thinking on Equations (5) and (4), leads to the same result for the approximations with linear and scalar combinatorial complexity.…”

“…In case the assembly is a bottleneck, safety stock may be required to reduce the required flexibility in planning otherwise. However, as in the distribution case discussed in Desmet et al (2009), we can expect the above result will be much more robust than many practitioners International Journal of Production Research 5777 are ready to consider. In the end it is the basic supply chain principle of 'risk pooling' that would logically predict it is more favourable to regroup risks in one stock point, the assembly, rather than spreading it over 11 stock points, the single assembly plus the 10 components.…”

“…As is done in Desmet et al (2009) we approximate the order line fill rate by the volume fill rate. The probability distribution function of S I a follows as:…”

“…Therefore, a first question we address is how to characterise the behaviour of each individual component. To answer this question we will build upon the results already developed in Desmet et al (2009). Furthermore, since the assembly process can start only when all components are available, that is after the largest back-order service time, a second question we address is related to the issue of combining stock-out effects of these components.…”

A simulation–optimization approach for a service-constrained multi-echelon distribution network

“…In the first stream of papers, the first paper to introduce service-constrained distribution models was by Rosenbaum (1981), who uses simulation to test a heuristic for determining the best combination of distribution center (DC) service levels to achieve a given external customer service level. Desmet et al (2010) use a similar approach by approximating the effect of a reduction in the warehouse fill rate on the system safety stock (the total safety stock in a network). Schwarz et al (1985) develop approximations and heuristics to maximize the system fill rate with a constraint on the system safety stock.…”