A Recovery Model for an EPQ System subject to Supply Disruption with Consideration of Safety Stock

Managers are continuously seeking a balance between an efficient system and cost minimization, and when disruptions occur, the decision making process becomes more complicated, hence requiring the aid of complex problem-solving mechanisms. This paper develops a recovery model of a single stage production-inventory system, where the manufacturer's original Economic Production Quantity is affected by supply disruption. The proposed model uses safety stock as a mitigation strategy and generates a recovery plan to minimize overall system costs. The developed constrained non-linear optimization model was solved using the Branch and Bound search algorithm. Experimental analysis showed that longer disruption periods resulted in a significant increase in total recovery cost and safety stock levels. Furthermore, a case study at an automotive components manufacturer showed that the optimal recovery plan yield lower total cost as compared to the actual data obtained, which resulted in significant savings in total cost. In conclusion, the proposed model could be a useful tool to assist manufacturers in minimizing the impact of disruption, while improving the efficiency of the supply chain.