Analysis and modelling of safety stock positioning for product family supply chains

Abstract

Fierce market competition forces enterprises to produce customized products with the cost and delivery time of mass production. A widely advocated approach is to use the concept of product family. Frequently, complex supply chains are managed under the combination of both make- To-stock and make- To-order strategies to reduce safety stock cost, while in the same or even shorter service time to the external customers. The question arising is at which stage to position safety stock effectively in the supply chain for a product family. After the analysis especially the benefit of positioning safety stock of a family of products as a whole instead of individually, this paper models the safety stock placement of a product family supply chain as an optimization problem, which can be solved conveniently by a specially designed genetic algorithm. © Springer-Verlag Berlin Heidelberg 2010.