Inventory Management: Bi-objective Optimization Models for Mass Customization

Abstract

In recent years, the problem of establishing the inventory levels in the manufacturing industry has considerably worsened due to the accelerated growth in demand for customized products, this behavior in the customers has created heterogeneous and unstable demands too difficult to forecast generating an increase in inventory levels. In response to this behavior, the strategy that companies have commonly used to offer a wide variety of products to meet this demand is Mass Customization. However, this response has created products with shorter life cycles significantly increasing the risks and costs in inventories due to deterioration, re-manufacturing, and obsolescence. Little attention has been paid to determining inventory levels when a company uses mass customization as its main production strategy. This paper develops two bi-objective optimization models to determine the optimal inventory levels for those industries that, due to the nature of the product, use mass customization to meet the needs of their customers. The performance of the models is compared with the performance offered by the traditional continuous review (Q,R) policy, the results show a significant reduction in total inventory costs while maintaining high levels of customer service level.