Inventory Control in Logistic and Production Networks

Abstract

The implementation of appropriate inventory control rules delivers the logistics operations of organizations a competitive advantage on the market place. This is also true for special types of networked manufacturing supply chains such as production networks which have complex topologies and increased complexity due to their logistic and production processes, information delays and the globalized markets. The paper builds the case of a production network and determines which inventory control policies applied in practice, order points and periodic-reviews, suit most the functions of the production network. Basically the production net consists of four manufacturing units that proceed to the joint development of products. In order to produce the four different items, the manufacturer orders from the other units as well as from the external supplier according to the exogenous customer demand. Although the case portrays a simplified instance of a production net, yet it already exhibits complex non linear dynamics inherent to such systems. The model is simulated with the system dynamics method which demonstrates the aptitude to describe distributed environments as long as product aggregation is permitted. The simulation results derived from the application of the inventory control rules on the production net will allow a detailed assessment of the suitability of each of the policies, in terms of the inventory costs criterion. A discussion on when to implement which inventory rule in respect to the functionalities of the production net will be pursued.