The impact of inventory and flow planning parameters on supply chain performance: An exploratory study

Abstract

The primary objective of this paper is to study the impact of selected inventory parameters and management techniques on the performance of an expanded and comprehensive retail supply chain. Specifically, we study the sensitivity of supply chain performance to three inventory planning parameters: (i) the forecast error, (ii) the mode of communication between echelons, and (iii) the planning frequency. We achieve this by constructing a detailed simulation model and with data adapted from a case study which we were involved with. The studies conclude that all the three parameters have a significant effect on performance. Increasing forecasting errors and the re-planning frequency decreases service, return on investment, and increases cycle time. Using a mode of communication that facilitates exchange of information between echelons in the supply chain yields a higher level of service when compared to the scenario where the entities in different echelons plan material flows independently.