Developing a Decision Making Model for Warehouse and Procurement Logistics' Positioning Between Stockout Costs and Service Level

Theme
Production planning
Project title Developing a Decision Making Model for Warehouse and Procurement Logistics' Positioning Between Stockout Costs and Service Level (Fehlmengenkosten)
Project duration 01.09.2009 – 30.06.2011
Results
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Up to the present day literature has already dealt with stockout-costs, but methods to quantify these costs have not been developed until now. The absence of these kinds of methods prevents an efficient logistical positioning between stockout-costs and the costs for holding safety-stocks. The costs for safety-stocks in a warehouse to provide a desired service-level can already be determined, but the stockout-costs that are connected with a desired service-level cannot be quantified yet. A mathematical function was developed to quantify the costs caused by missing material in the production depending on the amount of missing material and its missing time.

Publications about the project

This paper elaborates the open scientific question with practical relevance to producing enterprises at which service level an article of a production warehouse should be provided to production. The objective of this paper is to develop a decision supporting logistic model calculating the service level of an article which should be achieved when considering the follow-up costs of a stockout situation (stockout costs) on the one hand and the costs of the logistic organization on the other hand (i. e. warehousing). The new logistic model’s elaborative work is based on known stock out cost types (i. e. by REICHMANN) as well as on the characteristic curves for the service level and the delivery delay developed by WIENDAHL and NYHUIS.

characteristic curves, delivery delay, logistic costs, production, service level, stock, stockout co

Up to the present day, literature has already dealt with stockout-costs, but methods to quantify these costs have not been developed until now. The absence of these kinds of methods prevents an efficient logistic positioning between stockout-costs and the costs for holding safety-stocks. The costs for safety-stocks in a warehouse to provide a desired service-level can already be determined, but the stockout-costs connected with a desired service-level cannot be quantified yet. This article introduces a mathematical function to quantify the costs in a company’s production caused by missing material, depending on the amount of missing material and its missing time.

stockout costs, material shortage, service-level, logistic costs, warehouse costs

Sponsor

The IGF project 16188 N of the research association BVL was funded via the German Federation of Industrial Research Associations (AiF) in the programme of Industrial Collective Research (IGF) by the Federal Ministry for Economic Affairs and Energy (BMWi) based on a decision of the German Bundestag.

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