Optimal and heuristic base-stock levels and review periods in a serial Supply Chain

Abstract

A key issue in a Supply Chain (SC) concerns the control policy to determine the optimal order-up-to levels or base-stock levels and review periods. In this study, a mathematical model is developed to determine the optimal installation or local base-stock levels and review periods for every member in the SC that uses periodic-review order-up-to (S) policy, with the consideration of the ordering cost at every installation. Our model considers four members, namely, a supplier, a manufacturer, a distributor and a retailer. We obtain optimal review periods and base-stock levels (in the class of order-up-to policy) for different SC settings. In addition, two Genetic Algorithms (GAs) have been developed to determine the best base-stock levels and review periods for all members in the SC.