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Optimization of safety stocks in models with an order service level objective or constraint

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  • Albrecht, Martin

Abstract

This paper studies inventory management models with an order service level objective or constraint. In practice, the order service level is a common key performance indicator, for example, in assembly-to-order systems and retail environments where customers request complete deliveries. For these models we propose a new component allocation procedure based on inventory rationing and new heuristics for safety stock calculation. The heuristics use item-based approximations for the order-based backorders. As the heuristics do not need detailed information about order bill-of-materials, their application scope is broad, and includes industrial-scale settings with a high number of orders. Computational results indicate that the heuristic solutions come close to the optimum. The inventory rationing procedure can lead to notable improvements if unit backorder costs differ significantly between each other.

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  • Albrecht, Martin, 2017. "Optimization of safety stocks in models with an order service level objective or constraint," European Journal of Operational Research, Elsevier, vol. 263(3), pages 900-909.
    • Handle: RePEc:eee:ejores:v:263:y:2017:i:3:p:900-909
    DOI: 10.1016/j.ejor.2017.05.011
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    References listed on IDEAS

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    Cited by:

    1. Martin Albrecht, 2021. "Component Allocation in Make-to-stock Assembly Systems," SN Operations Research Forum, Springer, vol. 2(2), pages 1-19, June.
    2. Bikash Koli Dey & Hyesung Seok, 2024. "Intelligent inventory management with autonomation and service strategy," Journal of Intelligent Manufacturing, Springer, vol. 35(1), pages 307-330, January.
    3. van Donselaar, Karel & Broekmeulen, Rob & de Kok, Ton, 2021. "Heuristics for setting reorder levels in periodic review inventory systems with an aggregate service constraint," International Journal of Production Economics, Elsevier, vol. 237(C).
    4. Soumya Kanti Hota & Biswajit Sarkar & Santanu Kumar Ghosh, 2020. "Effects of Unequal Lot Size and Variable Transportation in Unreliable Supply Chain Management," Mathematics, MDPI, vol. 8(3), pages 1-24, March.
    5. Sun, Yimeng & Qiu, Ruozhen & Sun, Minghe, 2024. "A robust optimization approach for inventory management with limited-time discounts and service-level requirement under demand uncertainty," International Journal of Production Economics, Elsevier, vol. 267(C).
    6. Zied Bahroun & Nidhal Belgacem, 2019. "Determination of dynamic safety stocks for cyclic production schedules," Operations Management Research, Springer, vol. 12(1), pages 62-93, June.

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