Exploring inventory order policies impact under the non-negative constraint of order quantity: System stability, service level, and cost

Abstract

Considering the non-negative constraint of order quantity, this study explored inventory system performance, including system stability, service level, inventory cost, and the effect of transportation delay time. Both the non-negative constraint and delay time render the system nonlinear and complicated, which makes it difficult to identify optimal order policy regions that combine system stability with a high service level and low cost. The purpose of this study is to systematically reflect the impact of order policies on inventory system performance from three aspects, including system stability, service level, and cost. The results of the simulation revealed the existence of public optimal order policies for different transportation delay times. Although these optimal order policies are similar when the target inventory parameter changes, lowering the target inventory parameter can also lower the inventory cost. If an appropriate order policy can be adopted, a low target inventory reduces inventory cost while maintaining system stability and a high service level, opening up new options for decision makers in supply chain management.