Consolidating Product Sizes to Minimize Inventory Levels for a Multi-Stage Production and Distribution System

• Published in: The Journal of the Operational Research Society Vol. 44; no. 7; pp. 637 - 644
• Main Authors: Newhart, Dennis D., Stott, Kenneth L., Vasko, Francis J.
• Format: Journal Article
• Language: English
• Published: Basingstoke Taylor & Francis 01-07-1993; Macmillan Press; Palgrave; Pergamon Press; Taylor & Francis Ltd
• Subjects: Applied sciences; Case-Oriented Papers; Coatings; Customer service; Distribution; Distribution planning; Exact sciences and technology; Inventories; Inventory; Inventory control, production control. Distribution; Inventory management; Investment inventories; Investment strategies; Location; Mathematical programming; Operational research and scientific management; Operational research. Management science; Operations research; Pipelines; Planning; Safety stock; Steel industry; Steels; Strategy; Studies; Supply chain management; Supply chains; United States > US; Production system; Security stockpile; Rental; Supply; Inventory control; Planning; Steel; Distribution system; Multilevel system
• ISSN: 0160-5682; 1476-9360
• DOI: 10.1057/jors.1993.113

The optimal design of a supply chain was approached in two phases by using: (1) a mathematical programming formulation and heuristic solution approach to minimize the distinct number of product types held at various points in the supply chain; and (2) a spreadsheet inventory model to estimate the safety stock needed to absorb random fluctuations in both demand and lead time throughout the system. This two-phased approach allowed management to quantify the effects of inventory required for locating parts of the supply chain in different geographic areas. The quantification of projected inventory requirements was a critical input used by senior management to clarify their final decision-making process.