Construction of two-stages logistics system considering service ratio and distribution of products for reduction of inventory and stock-out under uncertain demand

Abstract

In this paper, a method for generating a logistics plan is proposed to simultaneously reduce the total inventory, logistics cost, and quantity of stock-out in a two-stage logistics system under uncertain demand. A mathematical model is constructed to resolve the problem of controlling the inventory and transportation of products between locations. There exists a trade-off relationship between the quantity of stock-out and the total inventory at distribution centers. The proposed method includes a strategy for reducing production and standard inventory and a model for minimizing discrepancies between the expected inventory and the resultant inventory among shops. A numerical experiment is performed on a simple model to evaluate the proposed method. The experimental results show that the proposed method is effective in simultaneously reducing the total inventory, logistics cost, and stock-out, through a comparison of methods involving various strategies for production and standard inventory and various models of product distribution from distribution centers to shops.