Stock Policy Research Articles

Optimization and Customer Utilities under Dynamic Lead Time Quotation in an M/M Type Base Stock System

In a manufacturing and inventory system, information on production and order lead time helps consumers’ decision whether they receive finished products or not by considering their own impatience on waiting time. In Savaşaneril et al. (2010), the optimal dynamic lead time quotation policy in a one-stage production and inventory system with a base stock policy for maximizing the system’s profit and its properties are discussed. In this system, each arriving customer decides whether he/she enters the system based on the quoted lead time informed by the system. On the other hand, the customer’s utility may be small under the optimal quoted lead time policy because the actual lead time may be longer than the quoted lead time. We use a utility function with respect to benefit of receiving products and waiting time and propose several kinds of heuristic lead time quotation policies. These are compared with optimal policies with respect to both profits and customer’s utilities. Through numerical examples some kinds of heuristic policies have better expected utilities of customers than the optimal quoted lead time policy maximizing system’s profits.

BESARAN STOK CADANGAN BERAS UNTUK INDONESIA

Almost all Asian countries, including Indonesia, adopt rice reserve stock policy. The purpose of the policy is to reduce food insecurity risk due to natural calamity and man-made disaster, as well as to stabilize rice price. In the last 20 years, Bulog has maintained rice reserve stock to I million tons for those purposes. The last few years, the environments have changed rapidly due to expanding of transportation and telecommunication, rice trade now has became more transparent, and market information more perfectly. Rice policy in Indonesia has also changed rapidly since 1998. The objective of this paper is to evaluate the optimum size of rice reserve for Indonesia by applying 3 approaches, namely, NFA (National Food Authority) of the Philippines, Stock to Utilization Ratio of FAO, and Usual Marketing Requirement. It is found that the size of rice reserve should be 0.75 million tons at the lowest and 3.4 million ton at the highest. The results were compared to rice released for emergency and price stabilization purposes by Bulog, and released for emergency purposes by NGO, and bilateral (G to G. It is concluded that Indonesia only needs 0.750 million tons of rice for reserve stock. This size of reserve includes rice reserve stock for East Asian/ Asean Rice Reserve System.

Comparing different coordination scenarios in a three-level supply chain system

The consignment stock (CS) policy, independently or coupled with vendor managed inventory (VMI), has been practised by businesses and shown to be profitable. It helps to reduce or eliminate out-of-stock instances caused by fluctuations in demand. CS brings several benefits to collaborating parties. Unlike the two-level supply chain models in the literature, this paper considers a three-level supply chain that consists of a supplier, a vendor and a buyer with CS policy agreements. The paper also examines four coordination scenarios (a combination of traditional and CS) in conjunction with a payment scheme between adjacent parties. Nine coordination cases (models) are provided. A sensitivity analysis is performed to study the effects of some parameters on the performance of the developed models. Most of the results showed that a combination of traditional and CS policies returned a higher total system profit.

Optimal repairable spare-parts procurement policy under total business volume discount environment

In asset intensive fields, where components are expensive and high system availability is required, spare parts procurement is often a critical issue. To gain competitiveness and market share is common for vendors to offer Total Business Volume Discounts (TBVD). Accordingly, companies must define the procurement and stocking policy of their spare parts in order to reduce procurement costs and increase asset availability. In response to those needs, this work presents an optimization model that maximizes the availability of the equipment under a TBVD environment, subject to a budget constraint. The model uses a single-echelon structure where parts can be repaired. It determines the optimal number of repairable spare parts to be stocked, giving emphasis on asset availability, procurement costs and service levels as the main decision criteria. A heuristic procedure that achieves high quality solutions in a fast and time-consistent way was implemented to improve the time required to obtain the model solution. Results show that using an optimal procurement policy of spare parts and accounting for TBVD produces better overall results and yields a better availability performance.

Managing blood inventory with multiple independent sources of supply

This paper focuses on the management of red blood cells (RBCs) by a large medical center within a regional blood exchange network. We provide both a theoretical and managerial contribution to the periodic-review fixed lifetime perishable inventory literature by considering multiple independent sources of supply. One source supplies blood via a typical standing order process. The other sources are smaller lower usage hospitals that randomly transfer blood to the medical center. Transferred blood is characterized by a much shorter average lifetime than blood supplied via standing order and introduces additional uncertainty into the inventory management process. We propose a solution approach that can be readily applied in practice and solve the multi-period cost minimization problem using a dynamic program. We provide numerical examples and demonstrate that our solution approach outperforms a corresponding base stock policy as well as the ordering policy that was actually used by the medical center.

A two-echelon inventory model with perishable items and lost sales

This article deals with a single perishable item, continuous-review, two-echelon serial inventory system consisting of a warehouse and a retailer. Customer demands at the retailer are assumed to be Poisson. All items have a xed shelf life and start aging on their arrival at the retailer. The demand that cannot be met immediately at the retailer is lost. All transportation times are xed. If there is any stock in the warehouse, the lead time for the retailer would be the transportation time from the warehouse. Otherwise, the retailer orders are met with a delay. In this article, using an approximate technique, we rst present a heuristic for nding cost-e ective base stock policy and then develop a simulation-based neighborhood search procedure to modify the quality of the solution. Also, a numerical experiment is carried out to evaluate e ectiveness and accuracy of the procedures. The results reveal that the approximate model performs rather well.

Consignment stock policy with unequal shipments and process unreliability for a two-level supply chain

This paper considers a vendor managed inventory model with consignment stock policy in which a single vendor delivers a single product to a single buyer in unequal-sized shipments. The vendor’s production process may produce some defective items during a production run. The buyer performs a screening process immediately after receiving each delivery from the vendor and the vendor bears the warranty cost of defective item, if any. The buyer either scraps or repairs the defective items by sending them to a repair factory. The average expected profit of the integrated system is derived using renewal reward theorem and a solution procedure is suggested to determine the optimal shipment policy of the vendor. Numerical examples are taken to determine both the equal and unequal shipment policies and compare their relative performances.

Optimization of two-stage production/inventory systems under order base stock policy with advance demand information

It is important to share demand information among the members in supply chains. In recent years, production and inventory systems with advance demand information (ADI) have been discussed, where advance demand information means the information of demand which the decision maker obtains before the corresponding actual demand arrives. Appropriate production and inventory control using demand information leads to the decrease of inventory and backlog costs. For a single stage system, the optimal base stock and release lead time have been discussed in the literature. In practical production systems the manufacturing system has multiple processes. The multiple stage production and inventory system with ADI, however, has been analyzed by simulation or assuming exponential processing time. That is, their theoretical analysis and optimization of release lead time and base stock level have little been obtained because of its difficulty. In this paper, theoretical analysis of a two-stage production inventory system with advance demand information is developed, where the processing time is assumed deterministic and identical; demand arrival process is Poisson, and an order base stock policy is adopted. Using the analytical results, optimal release lead time and optimal base stock levels for minimizing the average cost on the holding and backlog costs are explicitly derived.

Measure of bullwhip effect in supply chains with first-order bivariate vector autoregression time-series demand model

With supply chains becoming increasingly global, the issue of bullwhip effect, a phenomenon attributable to demand fluctuation in the upstream section of the supply chains, has received greater attention from many researchers. However, most existing research studies on quantifying the bullwhip effect were conducted under the first-order autoregressive [AR(1)] incoming demand process or its variants as the fundamental demand process, thereby failing to account for the retailer demand dependency. This research work thus examined the bullwhip effect for the first-order bivariate vector autoregression [VAR(1)] demand process in a two-stage supply chain consisting of one supplier and two retailers. The impacts of the correlation parameters of the demand process, the correlation coefficient between the two error terms, and the variances of the error terms on the bullwhip effect were investigated. As such, the measure of the bullwhip effect was established using an analytical approach in which the minimum mean square error (MMSE) forecasting method and the base stock policy were applied to all members of the supply chain. Numerical experiments were then conducted to illustrate the behavior of the bullwhip effect with respect to various parameters of the demand processes to see in which situations the bullwhip effect would be absent. In addition, an evaluation of the inventory variance ratio was analyzed.

Forward and backward stocking policies for a two-level supply chain with consignment stock agreement and stock-dependent demand

We consider a vendor-managed inventory with consignment stock agreement applied to the integrated vendor–buyer system, in which the vendor manufactures a single product in batches and delivers it in equal-sized transfer lots to the buyer. Some of the delivered items are presented to the end customers in the buyer's display area, while the rest of the items are kept in the buyer's backroom warehouse. Demand is assumed to be positively dependent on the amount of stock displayed. We propose a new joint economic lot sizing (JELS) model, taking into account the vendor's stocking policy, to maximize the total profit for the coordinated system. This paper first proves that, for any stock-dependent demand, a minimum restocking level at the buyer's sales floor is a more profitable strategy than the traditional run-out replenishment policy. It then shows that when the unit inventory holding cost decreases as stock moves downstream the supply chain, the vendor ought to adopt the forward stocking policy, in which product is pushed forward to the buyer's warehouse as soon as possible. Finally, it derives the analytical formulations for the maximum inventory levels at different stocking points, while the vendor adopts either forward or backward stocking policy. Numerical examples are also provided for illustration.

Maximizing Price Stability in a Monetary Economy

In this paper we analyze options for the European Central Bank (ECB) to achieve its single mandate of price stability. Viable options for price stability are described, analyzed, and tabulated with regard to both short- and long-term stability and volatility. We introduce an additional tool for promoting price stability and conclude that public purpose is best served by the selection of an alternative buffer stock policy that is directly managed by the ECB.

Integrated Semiconductor Supply Chain Production Planning

In this paper, we propose a deterministic mixed-integer programming model to schedule weekly production quantities for semiconductor manufacturing in order to meet forecasted demand over a six-month planning horizon. The model considers facility capacities, facility qualifying, limits on the number of facilities to use, and unit-level minimum inventory requirements. Model validity is demonstrated with a simple test case based on an industry dataset. A case study is then presented using actual industry data. Minimum inventory requirement levels are varied and compared to results obtained from traditional safety stock policies.

Determination of inventory for mining production with a real options approach and comparison with other classic methods

Safety stock of mining production is kept to prevent ore supply from stock-out, due to the existence of high uncertainty in mining operations and various unforeseen geological conditions. The downstream of mining normally runs in a relatively constant status which tolerates limited fluctuation from the upstream. An unreliable ore supply would cause the insufficient equipment utilisation and economical loss, and even the shutdown of processing plant. Since the rise of inventory management in the 1980s, there have been many studies conducted for enterprises to optimise their inventory and fulfil their clients’ demands. However, those studies mostly focus on the retail industry. The research interests are mainly in the variability of demand and lead time, and the modelling of a multi-echelon chain, which are not often suitable for mining production. Mining production has its own features, which requires a tailor-made policy of safety stock for itself. Real options technique is one suitable method to determine the safety stock of mining production. In this paper, it first analyses the flaws of the existing techniques of calculating safety stock to be used in mining production, and then elaborates the development of a new safety stock policy, based on a real options technique. By a case study, it analyses real data of mining production from Kittilä mine, illustrates the use of the new method and compares this new method with the conventional methods. It shows that the real options approach can provide mining practitioners with a more accurate and reasonable stock level, and more profit.

Monotonicity of base stock policies

We analyze monotonicity of base stock levels in multi-product inventory-production systems where arriving demand triggers production of a new unit. In a paper from 1996, Rubio and Wein used open Jackson networks to describe such integrated models. They conjectured that the base stock level should increase with the utilization in the production system. We present a basic analytical proof of the general presumption for single- and multi-product systems.

The Inner Geographies of a Migrant Gateway: Mapping the Built Environment and the Dynamics of Caribbean Mobility in Manchester, 1951–2011

Between the 1960s and 1990s a series of urban redevelopment projects in Manchester radically transformed ethnic settlement in the city. The ward of Moss Side, which had been a gateway for Caribbean and African immigrants, experienced repeated slum clearances in which whole communities were relocated and large tracts of housing stock were demolished and redesigned. The relationship between these physical and demographic changes has been overshadowed by the persisting stigmatization of Moss Side as a racialized “ghetto,” which has meant that outsiders have constructed the area as possessing a fixed and homogenous identity. This article uses geographic information systems in conjunction with local surveys and archival records to explore how the dynamics of immigrant mobility within Moss Side were shaped by housing stock, external racism, family strategies, and urban policy. Whereas scholarship on ethnic segregation in Britain has focused on the internal migration of ethnic groups between administrative areas, using areal interpolation to connect demographic data and the built environment reveals the intense range of movements that developed within the variegated urban landscape of Moss Side.

Highlands Station - a story of economic and environmental sustainability

Summary Our management philosophy is to try and reduce any limiting factors so that the farm, livestock, and the people are able to reach their full sustainable potential. This is done by: • Monitoring fertility, pasture, stock, technologies, and markets and then adjusting management plans accordingly • Matching the most sustainably profitable stock policies to the various land classes • Having a good team of staff and advisors, and ensuring they have the resources and guidance to do their jobs well • Ensuring this business makes reliable profits, some of which are used to improve the property for future generations of owners and also for environmental work, such as protecting bush and streams. As the saying goes 'You have to be in the black to be green

Lead Time Quotation and Customer Utility in an M/M type Base Stock System

Information on demand and lead time is useful for production control and consumer’s decision. In this paper, a one-stage production and inventory system with a base stock policy, which is defined by Savasaneril et. al (2010), is considered. Each arriving customer decides whether he/she enters the system based on the quoted lead time informed by the system. The decision is made by a utility function of customers. An optimal lead time policy for the system to maximize the system’s profit is derived by a Markov decision process. Several kinds of heuristic policies are compared with optimal policies with respect to both profits and customer’s utilities.

Effectiveness of consignment stock policy in a three-level supply chain

The paper studies a three-level supply chain having one supplier, one vendor and multiple buyers under multi-shipment consignment stock policy which is applied by the supplier when he delivers semi-finished products to the vendor. The vendor who produces fully finished products applies the same policy when he delivers to buyers. The integrated system cost which consists of production cost, shipment cost and stock-holding cost is minimized subject to no-shortage in any part of the chain. Optimal decisions are obtained for a numerical example. It is found that the consignment stock policy performs better than the usual shipment policy when the stocking component of holding cost of the item is less in the downstream. The effectiveness of the consignment stock policy under different situations is also investigated.

Improving Service Levels through Reverse Factoring

Does 'reverse factoring' - a supply chain finance solution that has recently become popular in industry - allow for operational benefits? Are the benefits automatic, or do they need to be explicitly required in the reverse factoring arrangement? We explore these questions through a periodic review inventory model of a supplier (she) that serves demands of two corporate customers, A and B. The customers have the same payment term toward the supplier and the same minimum service level requirements, but customer A (he) can offer reverse factoring. The supplier chooses her base stock policy and internal cash retention policy in order to minimize her average total cost, while satisfying the customers' service level requirements. We use simulation-based optimization to determine the optimal policies and cost. Through numerical experimentation, we find that the supplier does not automatically offer a better service to customer A, but would rather collect any financial savings resulting from reverse factoring. These savings are however large enough that customer A can require a significant service level improvement. We find that the maximum improvement depends on the initial service level requirement, the demand uncertainty, the absolute difference between the supply lead time and the payment term, and the relative size of expected demand from customer A. Our work contributes to a better understanding of the operational dimensions of supply chain finance.

Inventory performance under staggered deliveries and autocorrelated demand

Production plans often span a whole week or month, even when independent production lots are completed every day and service performance is tallied daily. Such policies are said to use staggered deliveries, meaning that the production rate for multiple days are determined at a single point in time. Assuming autocorrelated demand, and linear inventory holding and backlog costs, we identify the optimal replenishment policy for order cycles of length P. With the addition of a once-per-cycle audit cost, we optimize the order cycle length P* via an inverse-function approach. In addition, we characterize periodic inventory costs, availability, and fill rate. As a consequence of staggering deliveries, the inventory level becomes cyclically heteroskedastic. This manifests itself as ripples in the expected cost and service levels. Nevertheless, the cost-optimal replenishment policy achieves a constant availability by using time-varying safety stocks; this is not the case with suboptimal constant safety stock policies, where the availability fluctuates over the cycle.