Placing Safety Stock in Logistic Networks under Guaranteed-Service Time Inventory Models: An Application to the Automotive Industry

Abstract

The aim of this paper is to solve the problem of placing safety stock over a Logistic Network (LN) that is representedby a Generic Bill of Materials (GBOM). Thus the LN encompasses supplying, assembling, and delivering stages. Wedescribe, in detail, the recursive algorithm based on Dynamic Programming (DP) to solve the placing safety stockproblem under guaranteed-service time models. We also develop a java-based application (JbA) that both models theLN and runs the recursive DP algorithm. We solved a real case of a company that manufactures fixed brake andclutch pedal modules of cars’ brake system. After running JbA, the levels of inventory decreased by zero in 55 out of65 stages.