Normal Approximations for Safety Stock Optimization in Multi-Echelon Supply Chains

In a first step, the thesis develops a normal approximation for the actual replenishment lead time in a 2-echelon distribution system. The actual replenishment lead time takes into account the waiting time for replenishment orders at the central warehouse. Reducing central safety stock impacts the waiting time for replenishment orders and as such the actual replenishment lead time. The actual replenishment lead time is to be used in the calculation of the system safety stocks. In a second step, the thesis expands these approximations to a 2-echelon assembly system. In a 2-echelon assembly system, the waiting time for the assembly is the maximum of the waiting time for all of the components required to start the assembly operation. We again develop a normal approximation. The normal approximations allow the use of existing safety stock models assuming normally distributed demand and lead times. In a third step the approach is expanded to spanning tree networks. The approximations are tested using simulation for distribution, assembly and a spanning tree network. The thesis also describes the business relevance of the findings and 3 cases.

Bram De Smet
  • Hendrik Vanmaele
Oct. 9, 2009, 1:41 p.m.
Research group