Optimize supply chain routes and reduce logistics costs. Part of the DevTools Surf developer suite. Browse more tools in the Business & Corporate collection.
Use Cases
Calculate economic order quantity (EOQ) to minimize combined ordering and holding costs.
Identify which suppliers to dual-source based on risk and volume concentration.
Model the impact of extending payment terms from net-30 to net-60 on supplier relationships and pricing.
Optimize warehouse positioning across multiple distribution centers to minimize average delivery distance.
Tips
Model demand variability separately from lead time variability — both drive safety stock requirements but through different mechanisms, and conflating them produces incorrect safety stock calculations.
Calculate safety stock using the service level factor (z-score): safety stock = z × σ_demand × √(lead_time). A 95% service level uses z=1.65; 99% uses z=2.33.
Identify the single longest lead time in your supply chain — this is your constraint. Reducing it has more impact on total cycle time than reducing all other lead times combined.
Fun Facts
The term 'supply chain' was first used in print by Keith Oliver at Booz Allen Hamilton in a 1982 Financial Times interview, making it a relatively recent business concept despite the underlying practices being centuries old.
Toyota's Just-In-Time (JIT) production system, developed by Taiichi Ohno in the 1950s–1970s, is estimated to have saved Toyota billions in inventory carrying costs and inspired the lean manufacturing movement globally.
The global supply chain disruptions of 2021–2022 cost the global economy an estimated $4 trillion, according to McKinsey — highlighting how optimization assumptions built around lean inventory can fail during systemic shocks.
FAQ
What is Economic Order Quantity (EOQ)?
EOQ = √(2DS / H) where D = annual demand, S = ordering cost per order, H = holding cost per unit per year. It minimizes total inventory cost by balancing ordering frequency against carrying costs.
When should I use safety stock vs. just-in-time?
Safety stock buffers against demand and supply uncertainty. JIT assumes reliable, frequent delivery and is vulnerable to any disruption. Use safety stock when lead time variability or demand variability is high; JIT works only with highly reliable suppliers.
