Decision support system for adaptive sourcing and inventory management in small- and medium-sized enterprises

Abstract

• Proposes a data-driven approach in sourcing and inventory management for SMEs. • Exploits Observational and empirical data to generate decision support solutions. • Promote the adoption and initiation of artificial intelligence in SMEs. • Promising implementation results in a real-world case study. Elevated business uncertainties and competition over recent years have caused changes to the data-driven supply chain management of sourcing and inventories across industries. However, only large-sized enterprises have the resources to harness data for aiding their decision-making and planning. By contrast, small- and medium-sized enterprises (SMEs) commonly have limited resources and knowledge, which affects their ability to collect and utilize data. Thus, it is a challenge for them to implement advanced decision support tools to mitigate the effects of market uncertainties. This paper proposes a decision support system (DSS) for sourcing and inventory management, with the aims of helping SMEs compile and exploit data, and supporting their decisions under business ambiguities. The DSS was developed using a simulation-optimization approach by incorporating an artificial neural network and a genetic algorithm for problem representation and optimizing decision support solutions. The exploitation of observational and empirical data reduces the burden of data compilation obtained from unorganized data sources across SME operations. Further, uncertainty factors such as raw material demand, price, and supply lead time were considered. When implemented in a medium-sized food industry company, the DSS can provide decision support solutions that integrate the selection of recommended suppliers and optimal order quantities. It can also help decision-makers to shape their inventory management policies under uncertain raw material demands, while also considering service levels, sales promotions, lead times, and material availability from multiple suppliers. Consequently, implementation of the DSS helped to reduce the total purchased raw material costs by an average of 51.62% and reduced the order interval and on-hand inventory costs by an average of 54.24%.