Optimizing safety stock placement in general network supply chains

The amount of safety stock to hold at each stage in a supply chain is an important problem for a manufacturing company that faces uncertain demand and needs to provide a high level of service to its customers. The amount of stock held should be small to minimize holding and storage costs while retaining the ability to serve customers on time and satisfy most, if not all, of the demand. This thesis analyzes this problem by utilizing the framework of deterministic service time models and provides an algorithm for safety stock placement in general-network supply chains. We first show that the general problem is NP-hard. Next, we develop several conditions that characterize an optimal solution of the general-network problem. We find that we can identify all possible candidates for the optimal service times for a stage by constructing paths from the stage to each other stage in the supply chain. We use this construct, namely these paths, as the basis for a branch and bound algorithm for the general-network problem. To generate the lower bounds, we create and solve a spanning-tree relaxation of the general-network problem. We provide a polynomial algorithm to solve these spanning tree problems. We perform a set of computational experiments to assess the performance of the general-network algorithm and to determine how to set various parameters for the algorithm. In addition to the general network case, we consider two-layer network problems. We develop a specialized branch and bound algorithm for these problems and show computationally that it is more efficient than the general-network algorithm applied to the two-layer networks.

Department dc:contributor.department

Massachusetts Institute of Technology. Operations Research Center.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2004

Author dc:creator

• Lesnaia, Ekaterina.

Advisor dc:contributor.advisor

• Stephen C. Graves.

• Operations Research Center.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

en_US

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/28856

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/28856