Applying the guaranteed-service model to a decentralized supply chain: Impact on the Cycle-Service-Level

In a multi-echelon inventory system, the Guaranteed-Service Model (GSM) aims at determining the optimal placement and amount of safety stocks that ensures a target service level at the lowest cost. This model assumes that demand is bounded at each stage of the considered supply chain where demand bounds are usually obtained on the basis of a target Cycle-Service-Level (CSL). Recent works show that the GSM can also be applied to decentralized supply chains, i.e. when different parts of the supply chain are controlled by different actors. However, the choice of demand bounds at different parts of the supply chain may affect the final customer CSL. This fact is usually ignored in the existing literature. In this paper, we first illustrate how the upstream demand bounds affect the downstream customer CSL. Besides, we propose two approaches that ensure to reach the target CSL in decentralized supply chains.