Multi-echelon Safety Stock Optimization formulation

This section outlines how multi-echelon Safety Stock Optimization is performed. There are three major steps as described below:

Assume you have a multi-echelon network, such as this:

Lead time demand distribution for each site is determined by demand statistics and demand class, using demand analysis and demand propagation.

The safety stock curve is constructed by the lead time demand distribution, service type and service requirements.

The problem is formulated using the safety stock curve and constraints. Safety Stock Optimization solves for coverage and service time for each site. Linear programming or dynamic programming is used to solve the MEIO (multi-echelon inventory optimization) problem. The solution method is determined on the model size and complexity. .