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An Application of a Cost Minimization Model in Determining Safety Stock Level and Location

Authors: Nadia Bhuiyan, Bahareh Amirjabbari


In recent decades, the lean methodology, and the development of its principles and concepts have widely been applied in supply chain management. One of the most important strategies of being lean is having efficient inventory within the chain. On the other hand, managing inventory efficiently requires appropriate management of safety stock in order to protect against increasing stretch in the breaking points of the supply chain, which in turn can result in possible reduction of inventory. This paper applies a safety stock cost minimization model in a manufacturing company. The model results in optimum levels and locations of safety stock within the company-s supply chain in order to minimize total logistics costs.

Keywords: Supply Chain, Optimization, Cost, safety stock, efficient inventory

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