Determining safety stock with backlogging and delivery spare time

In this work a technique for evaluating the effect of backlogging and the influence on service level of the presence of slack time in the deliveries is presented. A supplier-retailer-customer supply chain is taken into consideration, so that it is not possible for the retailer – who holds the safety stock – to react to a sudden increase of the demand with any kind of expedited production/replenishment order. With this technique it is possible to search for the optimal trade-off between time and safety stock in order to reach a certain service level, as well as to determine the increase in the service level that is possible to gain having at disposal some slack time from the moment in which an order is received and the moment the ordered item must be loaded in the carrier or consigned in the hands of the customer. Thus, the concept of virtual safety stock is refined, along with a numerical investigation of its effectiveness versus the use of traditional physical safety stock.