An application of cost-effective fuzzy inventory controller to counteract demand fluctuation caused by bullwhip effect

Abstract

This paper develops a fuzzy inventory model to counteract the demand fluctuation in supply demand networks, which combines fuzzy logic controller with (s, S) policy based on economic order quantity (EOQ) model. Following a literature review and a discussion of counteractions to the bullwhip effect and the obstruction of general counteraction in supply demand networks, a multi-echelon fuzzy inventory model in supply demand networks is proposed. A simulation model with one- and two-echelon supply demand network is built and tested for (s, S) policy based on the classical EOQ model and the proposed fuzzy inventory model. Based on the simulation, results of the relevance performance are presented and discussed, which show that the proposed multi-echelon fuzzy inventory model provides not only a cost-effective management of inventory (e.g. lower inventory levels and cost) in market uncertainty, but also another effective alternative for counteracting demand fluctuation. In particular, the proposed multi-echelon fuzzy inventory model shows benefit in counteracting demand fluctuation in multi-echelon supply demand networks. Finally, some conclusions and suggestions for further research works are presented.