Balancing Cost and Service Performance: A Multi Objective Inventory Planning Approach for Multi Echelon Supply Chains

This paper presents a decision-support framework for analysing the trade-off between total operational cost and customer service level in multi echelon inventory systems. The model integrates fixed-order-quantity replenishment policies, lead-time dynamics and multi objective optimisation to generate a detailed Pareto frontier of efficient solutions. A real multi echelon distribution network is used to demonstrate the model’s applicability and managerial relevance. The results indicate that raising the service level from 46% to the sector standard of 96% increases total cost by approximately 19%, while achieving full demand satisfaction requires an additional 5% cost increase for only marginal service improvement. This pattern reveals a clear cost–service turning point around the 96% service level, beyond which additional gains exhibit sharply diminishing returns. The framework, therefore, provides a transparent and analytical mechanism for identifying replenishment strategies that balance cost efficiency with service performance. By decomposing total cost into ordering, holding, transport and lost-sales components, the model enhances managerial visibility and supports targeted policy adjustments. The paper also discusses limitations of the current formulation and outlines avenues for future research, including alternative replenishment policies, multi-product extensions and richer uncertainty modelling.