Decision support system for inventory management by TOC demand-pull approach

Abstract

Theory of Constraint (TOC) suggests the application of demand-pull approach combined with buffer management to effectively manage inventory. The initial target buffer size, the timing to adjust the buffer and the amount of size to be adjusted are major managerial decisions that determine whether the demand-pull approach can be successfully applied in practice. However, there exist few studies that discuss the determination of parameters of buffer management in depth. Therefore, we constructed a decision support system (DSS) to assist users in finding applicable parameters when using demand-pull replenishment combined with buffer management. This DSS provides two modules: the search-of-parameter and the specific-parameter modules. The search-of-parameter module allows users to set the desired range of each strategic parameter to be simulated. Based on the range assigned, the system automatically generates various combinations of the strategic parameters and provides one simulation run for each combination. The specific-parameter module only simulates one specific combination of parameters assigned and provides a more detail graphical display for the simulated results. The DSS also provides various charts for users to analyze the performance of a specific combination of parameters. To demonstrate the application of this DSS, we use a set of historical data for an integrated circuits (IC) product provided by a wafer foundry in Taiwan. From the results in the simulation, feasible actions to the inventory control will be suggested.