CONSOLIDATING PRODUCT SIZES TO MINIMIZE INVENTORY LEVELS FOR A MULTISTAGE PRODUCTION AND DISTRIBUTION-SYSTEM

The optimal design of a supply chain was approached in two phases by u sing: (1) a mathematical programming formulation and heuristic solutio n approach to minimize the distinct number of product types held at va rious points in the supply chain; and (2) a spreadsheet inventory mode l to estimate the safety stock needed to absorb random fluctuations in both demand and lead time throughout the system. This two-phased appr oach allowed management to quantify the effects of inventory required for locating parts of the supply chain in different geographic areas. The quantification of projected inventory requirements was a critical input used by senior management to clarify their final decision-making process.