A method for the determination of safety stock levels in order to study the effect of replenishment leadtime information sharing

Information sharing provides opportunities to reduce the safety stocks held to face uncertainty. In this context, we study the effect of sharing the information on replenishment leadtime on safety stock levels in a two echelon supply chain. We assume that the demand at the retailer is deterministic while the replenishment leadtime at the warehouse is variable with a uniform distribution. Two replenishment polices are presented, the first one for the case without information sharing and the second one with information sharing. A mathematical proof identifies the optimal safety stock level in each case. Next, the value of leadtime information sharing is estimated by comparing safety stock costs in these cases. The results of the mathematical proof as well as the numerical experimentations of a downstream pharmaceutical supply chain both show a significant reduction of total system costs thanks to leadtime information sharing.