Determining the optimum safety stock under rolling schedules for capacitated multi-item production systems

Abstract

In an uncertain environment, the production plans change frequently between two consecutive planning cycles under rolling schedules. Safety stock can be used to reduce schedule instability or plan changes and to maintain the customer service level against uncertainty. There is a tradeoff among the cost of plan changes, the cost of having planned safety stock less than the target level and the inventory carrying cost. This paper develops a linear programming model to optimise the overall costs, consisting of the above three components, under resource constraints for multi-item production systems. The linear programming model illustrates this tradeoff using an example problem and the model is applied to an industrial problem.