Simplifying the Virtual Safety Stock formula

The paper deepen the analysis into the Virtual Safety Stock theory, which is an approach intended to drastically reduce safety inventory levels exploiting the eventual time lag between the moment when a product is ordered and the time the product needs to be available, while preserving the same performance as a production system that operates with physical safety stock. The original virtual safety stock definition embeds two major problems: a double Gaussian integral in the formulation together with the heritage of the unrealistic assumptions already included in the earliest Hadley and Whitin’s safety stock conception. This paper describes an alternative approach in which the virtual safety stock is defined with a closed-form expression much easier to compute and use in operations management practice.