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Cost optimization model of distribution systems in supply chain under stochastic demand

A cost optimization model of supply chain distribution system is proposed for a single product. The demand per day and the lead-time are assumed to be stochastic variables. Cost optimization problems of distribution systems with multiple manufacturers, an intermediate warehouse and multiple distributors are studied, under the restricted service level that the distributor must meet customer's demand. The model considers ordering cost, replenishing goods cost, inventory holding cost and in-transit holding cost, transport cost and shortage cost synthetically. Algorithm of optimal order quantity is given under the constraint. Finally, a numerical example is given to verify the effectiveness of this model.