Supply chain focus dependent safety stock placement

Abstract

Increasing globalization, growing product range diversity, and rising consumer awareness are making markets highly competitive, forcing supply chains to adapt constantly to different stimuli. Growing competition between supply chains (as well as players within them) is also warranting a priority for overall supply chain performance over the goals of individual players. It is now well established in the literature that, among the many order winners, both overall supply chain cost and responsiveness (i.e., supply chain lead time) are the most significant determinants of supply chain competitiveness. The literature, however, mostly focuses on supply chain cost minimization with rather simplistic treatment of responsiveness. By introducing the concept of a coefficient of inverse responsiveness (CIR), we facilitate efficient introduction of responsiveness related costs into the scheme of supply chain (SC) performance evaluation and/or optimization. Thus, our model aids supply chain managers in achieving better strategic fit between individual business unit strategies and overall supply chain requirements in terms of cost efficiency and responsiveness. In particular, it aids in strategic placement of safety stocks at different stages in the supply chain. Our model also offers managerial insights that help improve our intuitions into supply chain dynamics. The model is more suited for strategic SC alignment, for example, when dealing with product changeovers or introduction of new product, rather than for operational control.