Performance Of Inventory System Research Articles

Improving inventory system performance by selective purchasing of buyers’ willingness to wait

We develop a demand postponement mechanism to improve the performance of a single item, periodic review inventory system with advance demand. The focus in the literature has been on how to stimulate customers towards advance demand. Predicting how demand will shift can be problematic, however, and backorders may still occur. We focus on how a firm can address backorders under a given advance demand pattern by a mechanism of compensation from which both the firm and the customers will benefit: the firm may offer a discount to customers for accepting later deliveries at a promised delivery date. Delivery postponement offers are made selectively, i.e. in some periods and to some customers only when there is a benefit for the firm to do so. Customers may decline the offer, but then face the probability of a backorder. In each period, the firm has to decide whether to make delivery postponement offers and for how long, and whether to order from its supplier and how much. We formulate the problem as a Markov Decision Process and solve it by backward induction. Numerical examples illustrate the properties of the state-dependent policies obtained for both uncapacitated and capacitated inventory systems. The postponement mechanism in capacitated systems leads to policies that differ from the threshold policy identified as optimal in the literature. Overall, the approach shows promise to improve system performance more efficiently compared to strategies aiming to increase advance demand in the system.

Dynamic strategies for measuring the performance of inventory system in closed loop supply chain

Dynamic strategies for measuring the performance of inventory system in closed loop supply chain

Dynamic strategies for measuring the performance of inventory system in closed loop supply chain

Closed loop supply chains are the complicated dynamical system, which focuses on all the factors involved in the comprehensive process and seeks to adopt strategies for achieving the chain established targets. The purpose of this study is to evaluate the food supply chain performance. A system dynamic approach is applied to examine the relationships and behaviour within the closed -loop supply chain. The variables with a significant effect on system performance are identified. Then, the simulated model is analysed by sensitivity to provide a tool for managers to generate policies and business decisions which can lead to enhancing the performance of the supply chain system. The results reveal lost sale-oriented to zero also inventory cost and transferring time in the lowest state by adding an intermediary unit between segments and implementation of the recommended policy.

The effect of working environment aspects on a vendor–buyer inventory model

Working Environment (WE) refers to all working conditions that influence a workplace and related human health. Human beings are critical resources of competitive advantage that improve a company's performance. A detrimental “WE” causes occupational illnesses and fatigue that reduce work quality. Since humans are involved in all stages of operations in companies, this health–related performance loss can negatively impact the performance of inventory systems. Despite its importance, surprisingly WE–related performance losses have not been investigated in a supply chain context. This paper, therefore, integrates WE design into a two–level (vendor–buyer) supply chain and investigates its effect on production and inventory decisions. A poor WE design increases workers' errors that generate defective items, which subsequently deteriorates the performance (total cost) of an inventory system. Better WE conditions improve system performance as a result of more efficient production and inventory policy.

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

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.

Incorporating Order Crossover Information into Service-Oriented Base Stock Policy Decisions

We investigate the impact of order crossover on a periodic, order-up-to (R,S) inventory system where attaining a target service level is the focus. Order crossover, when orders arrive in a sequence different from that in which they were originally placed, is increasingly likely to occur in modern supply chains. One reason for this is the increasing pressure to focus on service performance, which we refer to as the “Amazon Service Effect”. Many service-oriented changes to order placement and fulfillment strategies will increase the chance of order crossover. While the majority of inventory control studies, including crossover-focused studies, tend to be cost-oriented, in practice many inventory systems are driven by service goals. To explore the use of crossover information in inventory policy decision-making we adopt the “effective lead-time” (ELT) approach (Hayya et al., 2008) to representing order lead-times where order crossover is present. We develop a hybrid discrete-event/continuous simulation model that utilizes a unique structure to provide a detailed representation of a stochastic inventory system and collect precise information about order crossover, effective lead-time, service performance, and related operating characteristics. We first address two crossover related assumptions that have not been directly addressed in the literature. We find that order crossover clearly impacts service-oriented inventory system performance (much as it does cost-oriented systems) and that a protection period of R ELT time units is appropriate for an R,S inventory policy under crossover. We then explore five methods of including ELT information into the process of determining the order-up-to level (S) for a periodic, order-up-to (R,S) inventory policy. We perform a full-factorial simulation study under various conditions of target service level, demand variance, and lead-time variance, for a total of 375 scenarios. We find the method used to include effective lead-time information into the decision significantly impacts service performance. We compare and contrast the different methods, discuss issues such as data requirements and the sources of error, and address the research and managerial implications of our findings.

Evaluating The Performance of Inventory Management The Production Division of PT. Tiga Serangkai Surakarta as a Case Study

This research aims to understand the process of production and to analyze the performance of inventory system on production division of PT. Tiga Serangkai. The data has been gathered from direct observation of the process production and warehouse and the interview with the production employee, the employee of warehouse division, supervisor of purchasing and finance manager. This research demonstrates that inventory system performance of PT. Tiga Serangkai Surakarta can be optimized through the determination of inventory policy, applying a model minimum and maximum inventory that considers the safety stock in accordance with service level plan, implementing model Reorder Point (ROP) which can be used as guidelines in charging supply back, and applying the model economic ordering quantity. In doing so, they can save the cost of inventory. Keywords: inventory management, economic order quantity (EOQ), PT. Tiga Serangkai

On the effect of lifetime variability on the performance of inventory systems

We consider a periodic review perishable inventory system. Item lifetimes are random and assumed to follow an Erlang distribution. This is a rich modeling allowing us to cover various cases of lifetime variability in practice. The demand process is assumed to be Poisson and the order lead time is constant. For the extreme cases of exponential and deterministic lifetimes, we provide an analytical approach for the system performance evaluation. We also conduct a simulation study to examine the important effect of lifetime variability mixed with the cost parameters on the total operating cost. It appeared that there might be opportunities to considerably improve the operating cost in the case of high lifetime variability. This is more apparent for cases with large outdate, lost sale, and purchasing cost parameters.

The value of joint decision-making in an inventory–production system with random yield and imperfect information

We study a production–inventory system for a single type of product with random demand and random yield. We consider a production process that suffers from quality problems where non-conforming units cannot be used to replenish the inventory. The portion of non-conforming units depends on the condition of the production process. We distinguish between two process states with different probabilities to produce a non-conforming unit. The process state cannot be observed directly but control charts are implemented to gather information. If the chart yields to an alarm, an inspection is performed and the machine is repaired, if necessary. We assume that a periodic review order-up-to policy is applied to replenish the inventory. The decision-maker has to choose the order-up-to level, as well as the sampling interval and the control chart parameters, in order to minimise the costs. We introduce a model, based on a Markov chain, to determine near optimal policy parameters and conduct a simulation study that indicates an excellent performance of the approximation. Our results give insights into the effects of quality control on inventory system performance and show that joint decision-making of the production and inventory department is advantageous.

Stabilization of Inventory System Performance: On/Off Control

Abstract Single-product inventory management model with both random and controllable demands and continuous input product flow with fixed uncontrolled rate under finite storage capacity is considered. We use the diffusion approximation of the stock level process. Optimal linear on/off control minimizing the variance of the stock level process in the steady-state case is investigated. The probabilities of the stock-out and overflow are controlled by the base stock-level, involving the storage capacity. The problem of minimizing the variance of the rate of delivering the product to outlets given the probability of the base-stock level exceeding is solved for nonlinear on/off control: continuous and discontinuous control is considered.

Impact of transportation lead-time variability on the economic and environmental performance of inventory systems

Storage and transportation of goods within global supply chains is a major cause of environmental damage in modern value added processes. Thus, in the past, theory and practice developed several approaches in order to decrease these negative environmental impacts that frequently counteract the traditional efficiency-oriented ambitions. However, in many cases the economic and environmental performance can be improved at the same time. As many activities in logistics and inventory management are related to the treatment of potential uncertainties in the system by establishing redundancies, the reduction of uncertainty has equally a positive impact on both performance measures. To investigate the interrelation between uncertainty and the economic and environmental performance of supply chains, a serial inventory system consisting of a manufacturer who works with overseas suppliers and a carrier is considered, whereas the carrier is able to reduce lead time uncertainty. The relationships between uncertainties and the economic and environmental performance of the considered inventory system are highlighted by a simulation study based on empirical data from an international container shipping supply chain.

On the performance of the base-stock inventory system under a compound Erlang demand distribution

In this paper, we propose a new method for determining the optimal base-stock level in a single echelon inventory system where the demand is a compound Erlang process and the lead-time is constant. The demand inter-arrival follows an Erlang distribution and the demand size follows a Gamma distribution. The stock is controlled according to a continuous review base-stock policy where unfilled demands are backordered. The optimal base-stock level is derived based on a minimization of the total expected inventory cost. A numerical investigation is conducted to analyze the performance of the inventory system with respect to the different system parameters and also to show the outperformance of the approach that is based on the compound Erlang demand assumption as compared to the classical Newsboy approach. This work allows insights to be gained on stock control related issues for both slow and fast moving stock keeping units.

Heat Transfer Approach to Modelling and Analysis of Reverse Logistics Inventory Models

Modeling and analysis of inventory systems in reverse logistics is more complex than in forwards logistics, because in reverse logistics not only amount of demand is not clear, but also uncertainty of product return is appeared in the system. In this paper, an inventory system with the possibility of product return is modeled by means of simulation tools and then thermal equivalent of inventory model, using laws of heat transfer is developed. In order to provide the thermal equivalent, components of the inventory system are known and for each component the thermal equivalent is introduced and then sensitivity analysis is used to show the similar behavior of the two models. Hence, analyzing the thermal model can lead us to know the effect of different policies and parameters on inventory system performance. Thermal equivalent model presented in this paper is a strong base for inventory system analysis with more complex structures in future studies.

LQ Optimal Sliding Mode Supply Policy for Periodic Review Inventory Systems

In this technical note, the problem of inventory management in supply chain is addressed from a control theory perspective. In the analyzed setting, the stock used to satisfy an unknown, time-varying demand can be replenished from several supply sources. The replenishment orders are realized with delay which differs among suppliers and transport alternatives. A novel sliding-mode inventory policy is proposed, which guarantees that the demand is always entirely satisfied from the on-hand stock (yielding zero lost-sales cost), the warehouse capacity is not exceeded (what eliminates the risk of high-cost emergency storage) and ordered goods are not returned to the suppliers. As opposed to the classical, stochastic approaches, the parameters of the proposed controller are selected by minimizing a quadratic cost functional, which ensures an optimal dynamical performance of inventory systems with disparate lead times.

Some insights regarding the optimal reorder period in periodic review inventory systems

The periodic review inventory system is not only pervasive, but also has an extensive literature dealing with various aspects, from its theoretical underpinnings through to its performance. However, the selection of the best review period and its behaviour with respect to basic inventory parameters such as demand and supply variability appears to be poorly understood. In this paper we treat the normal and gamma distributions which are probably the two most commonly used distributions of demand over the key (protection) time interval in a periodic review system. We show that the total cost function is not necessarily well behaved as a function of the review period; in particular, it can be non-convex, which complicates the determination of the best value of the review interval. Also we demonstrate and explain how the best review period changes as the values of various parameters are modified. Some of these changes are initially counterintuitive in nature. Managerially oriented interpretations should also be helpful to organisations seeking improvement in inventory system performance.

Inventory management support systems for emergency humanitarian relief operations in South Sudan

PurposeTo develop and test three different inventory management strategies as applied to the complex emergency in south Sudan.Design/methodology/approachQuantitative modeling, simulation, and statistics.FindingsThis research identified critical system factors that contributed most significantly to inventory system performance, and identified strengths and weaknesses of each inventory management strategy.Research limitations/implicationsThis research represents a first step in developing inventory management systems for humanitarian relief. Future work would include modeling correlation among relief items, multiple items, and considering the impact of information.Practical implicationsIn a domain that has seen limited application of quantitative models, this work demonstrates the performance benefits of using quantitative methods to manage inventory in a relief setting.Originality/valueThis research has value for relief organizations by providing a real‐world application of quantitative inventory management strategies applied to a complex emergency, and demonstrated performance advantages of quantitative versus ad hoc methods. This research has value for researchers by providing a new application of simulation and mathematical modeling (humanitarian relief).

Improving the Performance of Inventory Systems Subject to Errors by Deploying the RFID Technology

One of the implicit assumptions considered in the majority of investigations performed in the area of inventory management is that the physical flow that passes through an inventory system as well as the associated information flow are free from defects. In other words, for a given type of product, the level of the available inventory shown by the information system corresponds exactly to the physical quantity really available. However, various factors can create a difference between the expected and the effective physical and information flows. The performance of such inventory systems whose flows are disturbed by errors can be improved by using advanced product identification and data capture technologies such as the RFID (Radio Frequency Identification) technology. This paper deals with the consideration of errors in inventory management related decisions and analyses whether RFID is cost effective in tackling this issue.

The complex relationship between inventory control and organisational setting: Theory and practice

Within companies it is widely recognised nowadays that the performance of inventory systems is not only determined by the way the inventory system is planned and controlled but also by its organisational architecture. Notwithstanding its importance, the field of production and operations management still lacks however, a comprehensive body of knowledge integrating both control and organisational aspects of inventory systems. One of the reasons for this shortcoming seems to be a lack of understanding of how inventory planning interacts with its organisational embedding in practice. In this article, this interdependence is further explored. Firstly, a conceptual framework is presented. The framework has been the starting point for five case studies performed during the last years. In this article data gathered over a period of more than fifteen years concerning one company is further explored. One of the main conclusions derived from this longitudinal case study is that organisations often try to neutralise shortcomings in the inventory planning and control system by applying organisational measures. In addition to this positive congruence, negative forms of congruence were also found. Shortcomings in the inventory control system are then negatively re-enforced by its organisational setting. The findings of the case study also suggest that companies often do not apply a clear and well-defined policy regarding the organisational setting of advanced inventory planning and control systems. We end this article by arguing that objectified notions on (re)designing inventory planning and control and its organisational design often under-emphasise irrational behaviour of the parties involved. A further elaboration of the framework presented in this article integrating operations management concepts and organisational theory therefore seems to be worthwhile.

Effects of Inventory Miscount and Non-Inclusion of Lead Time Variability on Inventory System Performance

Abstract This paper addresses concerns of die management of a service parts organization for the realized service level [Pcirc], measuring parts availability (from shelf), being much lower than die prescribed service level P. The diagnostic study suggested the potential causes were die inventory miscount and die non-inclusion of lead time variability in computing reorder points. Quantitative measures for the degradation in the service level are derived as a function of the level of inventory miscount and the lead time variability. The prevailing levels of inventory miscount errors and lead time variability are estimated for a service parts organization with 45,000 parts and annual sales volume of $65 million. The composite degradation in service level P∘ is computed when these causes are operating individually and jointly. Handled by the Department of Inventory.

Critical Ratio Scheduling: Dynamic Due-Date Procedures under Demand Uncertainty

Abstract This paper is concerned with the problem of maintaining order due dates in job shops that manufacture products to replenish a finished goods inventory controlled by an order point system. Two different strategies for maintaining order due dates—static and dynamic due date procedures—are analyzed using both shop and inventory system performance measures. This study examines the influence of the degree of predictability of the final product demand pattern on the performance of the static and dynamic procedures. The demand pattern for individual products is characterized by a long-run demand rate, a period-to-period serial correlation coefficient of demand, and a coefficient of demand variation. The results indicate that the dynamic due-date procedure does not provide a significant improvement in the performance of the production system in comparison with the static procedure - even when the predictability of the demand during the replenishment lead time is improved.