Robust design of (s,S) inventory policy parameters in supply chains with demand and lead time uncertainties

Demand and lead time uncertainties have significant effects on supply chain behaviour. In this paper, we present a single-product three-level multi-period supply chain with uncertain demands and lead times by using robust techniques to study the managerial insights of the supply chain inventory system under uncertainty. We formulate this problem as a robust mixed-integer linear program with minimised expected cost and total cost variation to determine the optimal (s, S) values of the inventory parameters. Several numerical studies are performed to investigate the supply chain behaviour. Useful guidelines for the design of a robust supply chain are also provided. Results show that the order variance and the expected cost in a supply chain significantly increase when the manufacturer’s review period is an integer ratio of the distributor’s and the retailer’s review periods.