Safety stocks in multistage divergent inventory systems: A survey

Multistage divergent inventory systems are often met in practice in both manufacturing and distribution environments. In this paper a survey of determination of safety stocks in these systems primarily protecting against uncertainties in demand is given. The analysis of the optimal safety stock policy leads to the echelon concept and raises the central problem of stock imbalances in divergent systems. For the special case of two-stage distribution systems diverse concepts for safety stock determination with and without lot-sizing are reported. The paper distinguishes approaches using push and pull strategies, as well as those working with echelon and local inventory control policies. For general multistage production systems the possibility of an extension of two-stage procedures is discussed. Finally, an approach based on a specific ‘no delay’ assumption for production systems and applicable to arbitrary divergent structures is described.