Case-Oriented Paper
Journal of the Operational Research Society (1993) 44, 637–644. doi:10.1057/jors.1993.113
Consolidating Product Sizes to Minimize Inventory Levels for a Multi-Stage Production and Distribution System
Dennis D. Newhart1, Kenneth L. Stott Jr.1 and Francis J. Vasko2
- 1Bethlehem Steel Corporation, Pennsylvania, USA
- 2Kutztown University, Pennsylvania, USA
Correspondence: D. D. Newhart, Systems Analysis, Research Department, Bethlehem Steel Corporation, Pennsylvania, USA.
Abstract
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.
Keywords:
Distribution, Inventory, Location, Planning
