Comparison of Stochastic- and Guaranteed-Service Approaches to Safety Stock Optimization in Supply Chains

Abstract

Contributions to multi-echelon safety stock optimization can be classified as being either of the stochastic- or guaranteed-service framework. Though both approaches have been used in inventory theory for a long time, there is still a lack of a detailed comparison. In this paper, such a comparison is presented. Differences in the materials flow are outlined and insights into the performance of both approaches are gained from a simulation study.