Inventory minimisation by service level optimisation for increased freshness and availability to end consumer in a multi echelon system: FMCG case

Traditionally, the inventory across value chain has been linked to customer service level (CSL), i.e., the service level provided by any company between distribution centre (DC) and cash distributor (CD). In order to get closer to the consumer, we need to relook at the traditional approach. With traditional approach, CSL is maximised which leads to superfluous inventory in the system which in turn leads to excess inventory handling cost and higher working capital, also freshness of the products is reduced. Unlike traditional approach where only cash distributor (CD) inventory is considered, a new approach is developed where total value chain inventory (VCI) is taken into account, instead of increasing the service level with reference to the DC-CD link. In the present work, service level is optimised and an overall VCI is minimised. To achieve the same, four models are developed, which are flexible to work with any network structure.