Integrating demand and supply variability into safety stock evaluations

Integrating demand and supply variability into safety stock evaluations

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Article ID: iaor20043431
Country: United Kingdom
Volume: 34
Issue: 1
Start Page Number: 62
End Page Number: 69
Publication Date: Jan 2004
Journal: International Journal of Physical Distribution & Logistics Management
Authors: , ,
Keywords: safety stock, supply chain
Abstract:

Managing inventories efficiently is a key factor for effective supply chain management. The area of inventory management has received significant attention in both academic and practitioner fields. Several tools and techniques have been developed and applied for managing inventories across the entire supply chain in order to reduce costs and improve efficiency. This paper presents the applications of a well-established model for managing the made-to-stock inventories at a large multinational pharmaceutical company. The model effectively incorporates both demand and supply variability into the safety stock evaluations. A comparative analysis between the proposed and existing models is performed by utilizing data from four production plants and the resulting cost benefits are presented. The paper concludes with recommendations for managing the safety stocks of the company by discussing various strategic and operational policies.

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