Newhart et al. [13] design an optimal supply
chain using a two-phase approach. The Þrst phase
is a combination mathematical program and heuristic
model, with the objective of minimizing the
number of distinct product types held in inventory
throughout the supply chain. This is accomplished
by consolidating substitutable product types into
single SKUs. The second phase is a spreadsheetbased
inventory model, which determines the minimum
amount of safety stock required to absorb
demand and lead time ßuctuations. The authors
consider four facility location alternatives for the
placement of the various facilities within the supply
chain. The next step is to calculate the amount of
inventory investment under each alternative, given
a set of demand requirements, and then select the
minimum cost alternative.