On the optimal safety stock levels in supply networks.

In this paper, we address the issue of defining the optimal size and distribution of safety stocks in a supply network. The determination of the appropriate safety stock level in complex and stochastic distribution systems is often a complex task, since safety stocks depend upon the production strategy adopted in response to customer demand, and can be located at different points in the supply chain. Moreover, in a multi-echelon, multi-player supply chain (i.e., a supply network), it is likely that safety stocks are interdependent among the players, and they necessitate decision-making with an integrated view of the supply chain. Our analysis is grounded on a discrete-event simulation model, reproducing a fast moving consumer goods (FMCG) supply network, and on real data related to the FMCG context. By exploiting the simulation model, we aim at optimizing the total logistics cost of the supply network as a function of the safety stock coefficient (k), thus identifying the optimal service level the network should deliver to customers.