Safety measures in the joint economic lot size model with returnable transport items

Abstract

The literature on the joint optimization of order and production quantities had a major focus on managing the downstream flow of materials in the past. Just recently, researchers have started to analyze packaging material that is required for transporting products along the stages of a supply chain as well. So-called 'returnable transport items' (RTIs), such as pallets or containers, are a special case of packaging material. RTIs may be used more than once for transporting products, which is why both the downstream and the return flows of these items need to be coordinated to permit a smooth flow of the finished product through the system. If RTI return times are stochastic, delays may occur, which can lead to stockouts at downstream stages of the supply chain. This paper studies alternative safety measures that help to avoid stockouts, namely I) RTI safety return times, II) RTI safety stocks, and III) a combination of both measures. The results of the paper support decisions on which safety measure should be used under which conditions.