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Supply Chain Inventory Management and Value of Shared Information
Abstract
In traditional supply chain inventory management, orders are the only information firms exchange, but information technology now allows firms to share demand and inventory data quickly and inexpensively. We study the value of sharing these data in a model with one supplier, N identical retailers, and stationary stochastic consumer demand. There are inventory holding costs and back-order penalty costs. We compare a traditional information policy that does not use shared information with a full information policy that does exploit shared information. In a numerical study we find that supply chain costs are 2.2% lower on average with the full information policy than with the traditional information policy, and the maximum difference is 12.1%. We also develop a simulation-based lower bound over all feasible policies. The cost difference between the traditional information policy and the lower bound is an upper bound on the value of information sharing: In the same study, that difference is 3.4% on average, and no more than 13.8%. We contrast the value of information sharing with two other benefits of information technology, faster and cheaper order processing, which lead to shorter lead times and smaller batch sizes, respectively. In our sample, cutting lead times nearly in half reduces costs by 21% on average, and cutting batches in half reduces costs by 22% on average. For the settings we study, we conclude that implementing information technology to accelerate and smooth the physical flow of goods through a supply chain is significantly more valuable than using information technology to expand the flow of information.
... For example, in healthcare, sharing patient data among healthcare providers can lead to better coordination of care, reduced medical errors, and improved treatment outcomes. Extensive information integration and data sharing positively affect supply chain performance, such as increased cooperation and reduced inventory [10,11]. Sharing data helps address information asymmetry by providing more comprehensive and accurate information to all stakeholders. ...
... (5) Equilibrium analysis of dynamic evolution Core enterprises and SMEs have reached a stable state through continuous evolution. According to Equations (10) and (14) According to the replication dynamic equation of core enterprises and SMEs, the corresponding Jacobian matrix can be obtained as follows: ...
... (6) Equilibrium analysis of dynamic evolution Core enterprises and SMEs have reached a stable state through continuous evolution. According to Equations (10) and (14), let F E (x) = 0 and F J (y) = 0 to obtain the five equilibrium points of the replicated dynamic equation, O 1 (0, 0), ...
The use of blockchain technology can ensure that data remains untampered with once it is on the chain. However, it doesn’t guarantee the authenticity of data before it enters the chain. In this study, we developed a three-party dynamic evolutionary game model involving core enterprises, small and medium-sized enterprises (SMEs), and financial institutions. Our findings indicate that a blockchain supply chain (BSC) generates more economic benefits than a traditional supply chain (TSC). We then built a dynamic evolutionary game model between core enterprises and SMEs, which revealed that SMEs are influenced by core enterprises and tend to adopt the action strategies of the latter. Additionally, we developed a dynamic evolutionary game model between core enterprises and financial institutions and compared the reward and punishment mechanisms with the synergy payoff mechanism. In the reward and punishment mechanisms, the game is a zero-sum game, where one party’s gains come at the expense of the other party. This mechanism has certain limitations and must meet specific conditions to improve the willingness of enterprises to share data. On the other hand, the synergy payoff mechanism enhances the authenticity of shared data by increasing the payoff for participants. When core enterprises play games with SMEs, the probability of core enterprises uploading real data and the distribution ratio of synergy payoff show an inverted U-shape. Similarly, core enterprises and financial institutions have comparable results in allocating synergy payoff. To leverage the synergy payoff mechanism, the distribution proportion of players participating in the synergy payoff should be considered fair. Finally, we validated our findings by simulating the models. If we can use blockchain technology to enhance the mutual trust between enterprises and banks, both banks and enterprises can achieve sustainable development.
... Given the abundance of components in some of these products, there is a felt need to organize production and manufacturing processes. Internal manufacturing of all components presents significant challenges, the most crucial being the organization of human resources and the creation of additional resources during market and demand changes (Cachon & Fisher, 2000). ...
... Shareholder value improves through maximizing company value. Laínez and colleagues consider shareholder value to depend on three factors: net income, invested capital, and debts (Cachon & Fisher, 2000;Gunasekaran et al., 2004). ...
Objective: The purpose of this research was to investigate the supply chain capabilities in the food industries by using indicators of competitive advantage, financial performance, and shareholder value to improve supply chain capabilities and ultimately design an appropriate structural model. Methodology: The present study is quantitative and descriptive-analytical in nature. The population of the study includes employees and experts in the food manufacturing industries, totaling 500 individuals. To determine the minimum sample size required, Morgan's table for limited populations was used, and ultimately, 217 completed questionnaires were returned and analyzed. The data collection tool was a researcher-made questionnaire. Data analysis was performed using structural equations and AMOS software. Findings: The results indicated significant relationships and components of the presented model. Factor analysis results showed that the paths and causal relationships between external and internal constructs in the structural model were confirmed with 95 percent probability. Conclusion: In general, initiatives based on cost reduction and productivity improvement are easier than others. For example, if an initiative focusing on reducing inventory levels leads to achieving previous sales levels, the benefits of this initiative are easily measurable. However, long-term growth requires an increase in revenue, and managers need to focus on all four methods mentioned above to enhance company value.
... Supply chain information collaboration refers to the deep processing of information by supply chain members using collaborative thinking, which emphasizes that members build and share all kinds of information resources, and form synergy through interaction and coordination [21]. The members of the fresh agricultural product supply chain can make close connections between production, inventory, logistics, sales and other supply chain links through collaborative utilization of information such as production, logistics, market demand and other information, avoiding unnecessary production waste, chain breakage, inventory backlog, and ineffective transportation [5,7,13], ensuring the whole cold chain of products and reducing energy consumption and carbon emissions [25]. For example, the "Fresh Day by Day" program of "Hema" is well received by the market. ...
... (0, 0, 0), 2 (0, 0, 1), 3 (0, 1, 0), 4 (0, 1, 1),5 (1, 0, 0), 6 (1, 1, 0), 7 (1, 0, 1),8 (1, 1, 1), respectively. Further, we judge the stability of the eight equilibrium points.According to the above formula, eigenvalues of each local equilibrium point can be calculated, as shown inTable A.1. ...
The information coordination of fresh agricultural products supply chain is conducive to improving the overall efficiency and competitiveness of the supply chain, and reducing carbon emissions. Under the carbon cap-and-trade policy, this paper constructed an evolutionary game model of supply chain information collaboration involving a fresh agricultural products supplier, a cold chain logistics service provider and a fresh agricultural products retailer, explored the selection of information collaboration strategies of each subject, and simulated it with system dynamics. The results show that: The stability strategy of the game system is related to the initial willingness of each subject. When any two parties participate in information collaboration, the other party will also choose to participate in collaboration. In addition, the choice of information collaboration strategy of the subject is also related to the collaborative planning ability, collaborative strategy formulation ability, consumers’ preference, the initial cost of each subject, revenue sharing and cost sharing mechanism, government subsidies, government regulation and carbon cap-and-trade policy. It is worth noting that the collaborative planning capability is more conducive to promoting the subject to choose information collaborative strategy than the collaborative strategy formulation capability; the carbon trading price has a greater impact on the subject's participation in collaboration, while the total amount of carbon quota has no impact on the choice of the subject's information collaboration strategy. Furthermore, based on the research results, the corresponding management suggestions are put forward from the two aspects of the government and the participants.
... In earlier studies, some representative scholars showed that more information sharing in the supply chain could dampen the "bullwhip effect" (Lee et al. 1997) and reduce the manufacturer's inventory and cost (Lee et al. 2000). Then Cachon and Fisher (2000) explored how the manufacturer can benefit from the retailer's inventory data and found that implementing information technology to accelerate and smooth the goods flow is more valuable than using information technology to expand the information flow. In addition to downstream information sharing (Lee et al. 1997(Lee et al. , 2000Cachon and Fisher 2000), some scholars later analyzed the benefits of upstream information sharing in a supply chain, such as production yield information (Choi et al. 2008) and product quality information (Wu et al. 2011), and the benefits of horizontal information sharing (Lei et al. 2014). ...
... Then Cachon and Fisher (2000) explored how the manufacturer can benefit from the retailer's inventory data and found that implementing information technology to accelerate and smooth the goods flow is more valuable than using information technology to expand the information flow. In addition to downstream information sharing (Lee et al. 1997(Lee et al. , 2000Cachon and Fisher 2000), some scholars later analyzed the benefits of upstream information sharing in a supply chain, such as production yield information (Choi et al. 2008) and product quality information (Wu et al. 2011), and the benefits of horizontal information sharing (Lei et al. 2014). The above studies evaluated the value of data information from the perspective of information sharing. ...
Digital transformation needs two essential phases of endeavors: digitalizing and data-driving business activities. The former involves much ICT capital investment that was widely studied, while the latter requires ongoing data capital investment (DCI) with many research gaps. Thus, firms face a trade-off dilemma in an input–output decision for DCI. To overcome the dilemma and fill such a gap, we first employ grounded theory to explore the underlying mechanisms of DCI to create value. Second, we construct a DCI-embedded game model and analyze DCI's economic effects under three supply chain power structures. Last, we conduct a case study to verify the main findings. The results suggest that: (i) supply chain firms can boost their profits through DCI only when the DCI implementation cost and level are within specific ranges; (ii) DCI has a positive vertical externality in the supply chain; and (iii) a firm will be more likely to implement DCI when it has a stronger market position in the supply chain.
... The construction industry has witnessed the introduction of multiple inventory and supply chain management (SCM) programs since the late 1980s. For the supply chain to operate well, inventory management is one of the crucial components that call for cooperative effort from a variety of stakeholders [10][11][12]. Numerous studies have been conducted to examine the management of the construction supply chain (CSC) from various angles, including information flow, subcontractor management, intelligent agentbased coordination, value stream analysis, integration, decision support system and optimization tool, and simulation platform [10]. Authorities have implemented environmental restrictions to mitigate the adverse consequences of CSC activities, owing to the construction industry's negative environmental impacts (CSC). ...
The characteristics of supply chains in the construction industry give rise to several information and collaboration system needs, such as system affordability and adaptability. The presence of several companies from a variety of industries in supply chains for the construction industry sets them apart. Information sharing and system integration therefore require cooperation and trust. In the manufacturing industry, a lot of efforts are being made to create tools, technologies, and strategies that would allow supply chain actors to communicate with one another and work together. However, it is more challenging to establish a solid environment for inventory and data management in the construction industry. The Internet and information technology are now being used in the construction industry to strengthen cross-organizational relationships. The employment of these tools in this industry is occasionally hampered by limitations like security worries, a lack of managerial commitment, high costs, and deployment rigidity. Additionally, a dynamic configuration of supply chains is required to integrate with more adaptable business models, increase internationalization, and enhance coordination. For this reason, this study primarily explores the inventory and supply chain tools currently in use in the construction industry and evaluates their functionality from a business and consumer perspective. Other areas of study are based on either inventory management for circular buildings or cross-organizational cooperation, and they include secure data storage, information exchange among stakeholders, and their modification. In the end, it aims to emphasize the key problems with data and inventory management in the construction industry, as well as inform about the potential technology solutions to make a guidance of academic and industry specialists within this study.
... Apart from the retailers' cooperatives, collaborative retail in the food industry is not frequently discussed. Scholars have identified collaborative ways of sharing data and predictions for storage and sales are ways to improve efficiency (Cachon and Fisher, 2000). Recent advances were achieved through the interplay among policymakers, the industry as a whole, and retailers also to get the best from the multichannel sales -i.e., online and on-site shops (Kumar and Bakshi, 2021) -, as well as to counteract the shortcomings of the existence of both channels, namely, the need for a unique presentation of the products and the cannibalism from internal competition. ...
... Cachon and Fisher consider that: "The integration of shared information in supply chain management significantly enhances inventory optimization and responsiveness to market changes." [7] For example, big data can be used to analyze how political conflicts, changes in trade policies, or economic crises might affect the supply chain, allowing businesses to plan and develop strategies in advance. ...
This paper explores the transformative impact of big data technology on cross-border supply chain inventory management. In the era of globalization, supply chains face increased complexities and risks, particularly in cross-border logistics. Challenges include transportation uncertainties, delays due to long-distance transport, infrastructure disparities, and transparency issues. Integrating big data analytics offers a solution to these challenges by enabling predictive analytics for demand forecasting, inventory optimization, and risk management. This study highlights the role of big data in enhancing supply chain transparency, reducing uncertainties, and improving decision-making processes. Examples from JD E-commerce and NongFu Spring demonstrate the practical application of big data in optimizing inventory management and mitigating risks. JD E-commerce employs artificial intelligence and big data analytics for inventory management, leading to reduced turnover days and cost efficiency. NongFu Spring, on the other hand, uses big data for scenario marketing and supply chain optimization. The paper concludes that big data technology not only revolutionizes inventory management but also plays a crucial role in addressing risks in the supply chain, thus leading to more efficient, transparent, and resilient supply chains in the face of globalization challenges.
... Given the scarcity of available data regarding the lead time of suppliers, we randomly sample values for ′′ from a uniform distribution within the 1 to 5-day range. A similar range of lead time previously employed in [117]. In this study, we have sourced the values of , , and from various sources, including [118][119][120]. ...
The electric vertical takeoff and landing (eVTOL) aircraft manufacturers presently await numerous pre-orders for eVTOLs and expect demand for such advanced air mobility (AAM) aircraft to rise dramatically in the near future. However, eVTOL manufacturers (EMs) cannot commence mass production of commercial eVTOLs due to a lack of supply chain planning for eVTOL manufacturing. The eVTOL supply chain differs from traditional ones due to stringent quality standards and limited suppliers for eVTOL parts, shortages in skilled labor and machinery, and contract renegotiations with major aerospace suppliers. The emerging AAM aircraft market introduces uncertainties in supplier pricing and capacities, eVTOL manufacturing costs, and eVTOL demand, further compounding the supply chain planning challenge for EMs. Despite this critical need, no study has yet been conducted to develop a comprehensive supply chain planning model for EMs. To address this research gap, we propose a stochastic optimization model for integrated supply chain planning of EMs while maximizing their operating profits under aforementioned uncertainties. Furthermore, we introduce deterministic and greedy models to benchmark the performance of the proposed stochastic model. To assess the adaptability of our stochastic model, we conduct various numerical analyses to analyze the impact of 1) endogenous eVTOL demand influenced by the quality of eVTOLs; 2) supply chain disruptions caused by geopolitical conflicts and resource scarcity; and 3) high-volume eVTOL demand similar to that experienced by automotive manufacturers; on EM supply chain planning. The findings from this study indicate that our proposed stochastic model can enable optimal decision-making in supply chain planning of EMs, even under potential disruptions.
... Specifically, product information serves two roles. On one hand, the exchange of product information smooths the development of product strategies and the creation of production synergies; for example, it may allow a supplier to invest earlier in anticipation of its clients' product announcements (Cachon and Fisher 2000;Lee, So, and Tang 2000). On the other hand, product achievement helps drive a firm's competitive advantage and production capacity (Chaney, Devinney, and Winer 1991;Calantone and Schatzel 2000). ...
We study how vertical integration shapes firms’ public disclosures. Theory suggests that firms can use public disclosure to coordinate with supply chain partners and predicts a substitution between vertical integration and public disclosure of future strategic plans, since the internalization of production reduces the need to publicly coordinate. Using data on the extent of vertical integration, we find that firms that become more vertically integrated reduce their public disclosures about their product strategies and that the reduction is most pronounced for vertically integrated firms with greater internalization of production and those with the largest informational and strategic frictions along the supply chain.
JEL Classifications: D83; G14; L14; M41.
... Inventory management is associated with costs that exert a direct influence on the value of inventory [13]. ...
Inventory management is pivotal for business performance and profitability. Efficiently handling inventory levels enhances operational efficiency and financial strategies. Poor management can result in financial losses, stock imbalances, delayed order fulfillment, and dissatisfied customers. This chapter discusses inventory management frameworks, focusing on objectives, techniques, and best practices. The primary goal is to balance overstocking and understocking, ensuring adequate working capital while optimizing costs. The chapter delves into various inventory management techniques, aiming to effectively control and manage inventory. It particularly sheds light on two pivotal techniques: Vendor-Managed Inventory (VMI) and Just-in-Time (JIT). VMI reduces inventory levels and improves fill rates, enhancing supply chain performance. On the other hand, JIT minimizes excess inventory and improves material flow. Both techniques present challenges and benefits. Accurate forecasting is highlighted as a best practice, aligning production with demand, reducing carrying costs, enhancing cash flow, and streamlining the supply chain. The literature is reviewed, emphasizing inventory management’s role in the broader context of supply chain management.
... Supply chain network design (SCND) aims to determine the overall configuration of the supply chain and requires decisions that significantly impact SC's performance. SCND typically includes three levels of decisions: (i) strategic decisions that determine the number, location, technology, and capacity of different types of facilities (Amiri, 2006); ; (ii) tactical decisions dealing with distribution planning, transportation, and inventory management (Azaron et al., 2008); (Cachon & Fisher, 2000); (iii) operational decisions including fulfillment of incoming customers' orders, and pricing (Christopher & Gattorna, 2005;Sousa et al., 2008). The work of Geoffrion and Graves, (1974) was among the first to consider the SCND. ...
Today, given the rising trend of e-commerce businesses, supply chain management in such chains has attracted the attention of academic societies. This research presents a multi-objective programming model to configure a dual-channel (conventional and e-commerce channels) supply chain network structure under triple uncertain sources, which jointly optimizes the allocating, pricing, and transporting decisions. Furthermore, considering the growing concerns on environmental sustainability, the environmental dimensions of the dual-channel supply chain are contributed. The proposed model minimizes the Carbon dioxide (CO2) emissions associated with transportation and the production process as an objective function to meet environmental standards. Multiple modes of transportation with different costs and CO2 emissions are considered in each distribution channel. The multi-objective fuzzy optimization model is solved by developing a fuzzy solution approach following the linearization of the proposed model. Through the use of numerical examples, the validity of the developed model and the usefulness of the solution method are demonstrated. The sensitivity analysis has also been performed to see the impact of changing some essential parameters on objective functions. The results show that the profit and environmental performance of the two-channel supply chain improve when more goods are shipped through the traditional channel than through the direct channel.
... Tedarik Zinciri Yönetimi (TZY), kurumların ve kuruluşların performansını arttırmak amacıyla, şirket içinde ve tedarik zincirinin diğer üyeleri arasında malzeme, ürün ve bilgi akışını etkili bir şekilde koordine etmeyi amaçlar. Küreselleşen tedarik zincirleri ve artan rekabet ortamında, başarılı bir TZY performansı için "entegrasyon"un kaçınılmaz bir gereklilik olduğu vurgulanmaktadır [1,2]. Bilgi asimetrisi ve karmaşıklığı göz önüne alındığında, bu tür koordineli entegrasyonun verimliliğine ulaşmanın zorlukları açıkça görülmektedir. ...
Bu araştırma, e-ticaret sektörüne özgü ihtiyaçları karşılayacak şekilde tasarlanmış, ayrıntılı ve esnek bir veri modelinin geliştirilmesine odaklanmaktadır. Çalışmanın esas katkısı, veri ambarı ve analitik süreçleri kapsayan ve bu iki katman arasında veri akışını etkin bir biçimde yöneten Intra-ETL süreçlerine sahip yenilikçi bir veri modelidir. Bu model, e-ticaret firmalarının müşteri davranışları ve satış trendlerini daha etkin analiz etmelerine imkan tanıyarak, bu analizlere dayalı stratejik kararlar alabilmelerine olanak sağlamaktadır. Geliştirilen model, böylelikle e-ticaret sektörünün veri yönetimi ve analiz yeteneklerini ilerleterek, sektörün özgül gereksinimlerine hızlı ve doğru çözümler sunabilen bir veri altyapısı oluşturmayı hedeflemektedir. Gelişen teknoloji ile artan veri hacmi, farklı kaynaklardan gelen verilerin anlamlı bir şekilde işlenmesi ve raporlanmasını gerektirmektedir. Bu ihtiyaç, perakende sektörü gibi müşteri taleplerine hızla yanıt verilmesini gerektiren alanlarda daha da önem kazanmaktadır. Müşteri davranışlarını derinlemesine analiz ederek onların karşılaştıkları problemleri belirlemek, müşterilerin çevrimiçi davranışlarını ve alışkanlıklarını inceleyerek ihtiyaçlarını tespit etmek ve buna yönelik aksiyonlar almak için uygun bir altyapı gereklidir. Bu bağlamda, verilerin etkin bir şekilde toplanması ve yönetilmesi büyük önem taşımaktadır. Önerilen çalışmada, perakende sektörüne hitap edebilen ve aynı zamanda analitik ihtiyaçlara da cevap verebilen, çeşitli kaynak sistemlerle uyumlu, e-ticaret destekli ve esnek bir çift katmanlı veri modeli tasarlanmıştır.
... High customer expectations, intense competition, and dynamic market demand are factors that increase supply-chain uncertainty [111]. Businesses that share information with customers improve their ability to detect fluctuations in the supplier's demand process [112]. It has also been stated that information sharing with customers provides a complete picture of product markets and reduces downstream uncertainty [113]. ...
Uncertainties caused by many internal and external factors can lead to supply-chain disruptions, increasing the vulnerability and cost of operations. In particular, the COVID-19 pandemic, whose worldwide emergence was not foreseen, has become a major threat to supply-chain resilience and has caused the disruption of global network connections. The purpose of this study is to examine in depth the impact of uncertainty on supply-chain resilience and to determine whether information sharing has a moderating effect on this interaction. The relationships proposed in the research model are tested through empirical analyses in SEM applied to 244 survey data points from internationally operating manufacturing firms in Turkey. The findings reveal several key insights. First, it is concluded that all dimensions of uncertainty, except technological uncertainty, negatively affect supply-chain resilience. Second, although no direct effect of technological uncertainty on supply-chain resilience is found, technological uncertainty has a negative effect on resilience when the moderating role of internal and supplier information sharing is taken into account. Low-level information sharing, as opposed to high-level, creates variation in the severity of supply-chain resilience at different levels of technological uncertainty. In addition, it is worth noting that a high level of information sharing with suppliers under high-uncertainty conditions negatively affects supply-chain resilience. The results of this study, conducted within the framework of the Contingent Resource-Based Theory, demonstrate compatibility with the theory. Based on all the findings, this study suggests that managers should adopt proactive strategies to maintain high supply-chain resilience, considering today’s highly uncertain conditions.
... Among the material flows, which are: financial, informational, and material; Materials are of great importance (Cachon and Fisher, 2000; Verma, most of Iran's manufacturing and industrial units, the traditional point of view is still used for supply, production, and distribution planning so that each of these plans their activities independently. For this reason, it primarily increases the total costs of the supply chains (Manzouri et al., 2010;Valmohammadi, 2014;Bazaz et al., 2022). ...
Because Supply Chain Performance coordinates Inventory Management under the SCOR Metrics paradigm; this research was performed to evaluate the SCOR Metrics of Supply Chain Performance based on Inventory Management at Shiraz Petrochemical Company of Iran. Performance indicators, as Alternatives; and Inventory Management factors, as criteria; were extracted from the research literature. The research method was descriptive-analytical, employing a hybrid FAHP-SCOR approach. Consequently, after weighing the criteria, the five alternatives have been prioritized. The results of this study lead to two deductions: firstly, the type of production is the most important factor in Inventory Management. Secondly, companies with a complex supply chain need to carry out processes to strike the right balance between the size of their inventory. The findings of this study can be applied to all petrochemical industries as a strategic plan.
... (except IC). Among the top ten articles from the entire inventory control database (with keywords from the last decade), we can find the following: (An and Huang, 2006;Benjaafar et al., 2013;Cachon and Fisher, 2000;Cachon and Lariviere, 2005;Coelho et al., 2014;Gallego and Ryzin, 2013;Hua et al., 2011b;Kapuscinski, 1996;Lockett and Wright, 2005;Metters, 1997). In parentheses next to the keywords, the total number of citations in the last decade is given. ...
Inventory control is one of the key areas of research in logistics. Using the SCOPUS database, we have processed 9,829 articles on inventory control using triangulation of statistical methods and machine learning. We have proven the usefulness of the proposed statistical method and Graph Attention Network (GAT) architecture for determining trend-setting keywords in inventory control research. We have demonstrated the changes in the research conducted between 1950 and 2021 by presenting the evolution of keywords in articles. A novelty of our research is the applied approach to bibliometric analysis using unsupervised deep learning. It allows to identify the keywords that determined the high citation rate of the article. The theoretical framework for the intellectual structure of research proposed in the studies on inventory control is general and can be applied to any area of knowledge.
... This research contributes to the understanding of how technology adoption can be a catalyst for improving supply inventory management practices in a globally competitive environment. (Cachon & Fisher, 2020) As investigated by Eclarin and Dagamac (2018) in their work featured in the Asia Pacific Journal of Multidisciplinary Research, the effects of inventory management practices on Small and Medium Enterprises (SMEs) performance in Davao City, Philippines, were examined. The study explored how proficient inventory management impacted crucial performance indicators such as profitability, customer satisfaction, and operational efficiency. ...
Business success in today's dynamic marketplace depends on effective supply inventory management. In this technologically advanced age, conventional manual methods are no longer sufficient. To improve accuracy, efficiency, and decision-making abilities, this study investigates the significance of technology adoption for efficient inventory management. It concludes several research studies and emphasizes the difficulties Small and Medium Enterprises (SMEs) in the Philippines face and their distinctive inventory management procedures. The supply office at Leyte Normal University is the focus of the proposed study, which aims to create an effective system for managing inventories. The study uses the action research methodology to design, implement, and evaluate a technology-based system that addresses current inefficiencies. The two-bin system, the just-in-time theory, and vendor-management inventory are examples of theoretical frameworks. Surveys using the Likert scale and open-ended questions will be used to gather data, and the results will show how the suggested method better satisfies user needs and increases efficiency. Advanced data analytics should be used, vendor collaboration should be encouraged, and customized reporting should be made possible. This study supports competitive enterprises, effective educational institutions, and improved inventory management methods.
... As a result, reasonable inventory adequacy can be maintained. A company's efficient inventory management reduces excessive inventory levels by improving production technology [6]. In particular, prompt provision of sales information allows manufacturers to effectively maintain proper inventory and dramatically reduce the lead time required to produce items. ...
In this study, we examined the impact of supply chain management factors on firm performance, and we focused on the mediating role of process innovation and partnerships. For the analysis, we surveyed 193 workers working in smartphone manufacturing companies. We found that information systems, support of top management, and performance management have positive impacts on a company?s process innovation. The factors that affect partnership are the support of top management and performance management. Process innovation and partnership also positively affect a firm?s financial and nonfinancial performance. Nonfinancial performance also shows effectiveness. Thus, to improve a firm?s supply chain management (SCM) performance, companies should focus on enhancing process innovation and partnerships that positively affect firm performance. Furthermore, this research can serve as a stepping stone for the development of SCM in line with the technological innovation of Industry 4.0.
... Based on Zotteri's (2013) classification, there are three main streams of research relating to bullwhip: theoretical, empirical and natural experimental. The first focusses on its causes and potential solutions, with information transparency as a possible remedy (e.g., Chen et al., 2000;Cachon and Fisher 2000;Lee et al., 1997). The second stream adopts the well-known Beer Game or its variants to test hypotheses on causes and potential solutions Donohue 2003, 2006;Croson et al., 2014). ...
Managing order pipeline inventory is important for controlling unwanted system dynamics, especially the bullwhip effect. We analytically explore the impact of desired target order pipeline inventory, advocated as a key decision in managing pipeline inventory, on system dynamics performance. Using control theory and system dynamics simulation, we evaluate two control mechanisms, termed as Reactive Pipeline Control (RPC) and Proactive Pipeline Control (PPC) approaches, in a nonlinear forbidden returns supply chain. We derive the analytical expressions of bullwhip under shock and seasonal demands and propose bullwhip avoidance strategies. The results indicate that an RPC based system always shows slower inventory convergence speed than that in the PPC based system, although the system with PPC policy may produce more unwanted oscillatory behaviour. Also, PPC always generates more bullwhip than that in an RPC-controlled system regardless of physical delays and system control parameters e.g. forecasting and inventory adjustment. Furthermore, compared with the linear system, the nonlinear forbidden returns system always generates less bullwhip and less oscillation at the expense of slow inventory recovery speed regardless of order pipeline control policies. Managers may consider different order pipeline control policies by jointly assessing their inherent system structure, control policies and customer demand characteristics, such as frequency and variance.
... Leveraging technology can enable partners to effectively discuss the parameters of future collaboration and establish information sharing mechanism required for monitoring of business relationships. The concept of information sharing between partners is a well-established notion in supply chain coordination literature (Barratt, 2004;Cachon, 2000;Croom, 2001). It follows that closer cooperation can lead to more information exchange. ...
In recent years, the circular economy (CE) has emerged as a guiding vision for sustainability impact both industry and society. However, within the manufacturing sector the implementation of CE remains ambiguous. Embracing closed-loop supply chains (CLSC) offers companies a practical way to incorporate key CE principles within their operations. However, transitioning to CLSC requires a broader view of internal operations and new forms of material flow coordination. The purpose of this research is to understand how supply chain processes will change for manufacturing firms seeking to adopt CLSC. The findings reveal that Industry 4.0 technologies have the potential to enable new supply chain coordination mechanism to emerge and link internal and external operations.
... The trend line clearly highlights the interest of the scientific and academic community in this area of knowledge. From the VosViewer software, Figure 3 evidences the most cited articles in the field of "Inventory Management", stands out the work developed by Cachon, G. (2000), entitled "Supply chain inventory management and the value of shared information", with 1243 citations, who studied the value of sharing information in a supply chain model with stochastic and stationary consumption demand. Then the research developed by Hua, G. (2011), entitled "Carbon footprint management in inventory management", with 549 citations, who investigated how companies manage carbon footprints in inventory management under the carbon emissions trading mechanism. ...
... Authors of Literature Prediction of demand , Mahajan et al. (1990), Chaharsooghi et al. (2008), Hosoda and Disney (2004) Grouping of orders Warburton and Disney (2007), Cachon and Lariviere (1999), Cachon and Fisher (2000), Holland and Sodhi (2004), Pujawan (2004) , Chandra and Grabis (2005) ...
The phenomenon of the bullwhip effect (BWE) has become a pressing concern in contemporary supply chain management. Every echelon of the supply chain faces the negative consequences of BWE somehow. So, it is crucial to determine the reasons responsible for the BWE to mitigate the consequences. The boutique industry in Bangladesh is a rapidly growing industrial sector. In this study, we focused on finding the reasons and consequences of the bullwhip effect on the boutique industry in Dhaka city. The main targets of this study are to examine the underlying reasons for the BWE, identify the most significant causes from the perspective of Dhaka city, and determine the major consequences of the bullwhip effect. Studies of previous literature and consultation with experts have identified sixteen common causes behind the bullwhip effect. This study uses a survey-based method; respondents are chosen through clustered sampling. Necessary data have been collected with a semi-organized inquiry form. Among all the 16 causes, six causes are found to be the most significant causes from the perspective of retailers and wholesalers. SPSS Version 26 has been used for statistical analysis to make the final decision. We also found ten consequences commonly faced by these two echelons of the boutiques' supply chain because of the bullwhip effect. These are high inventory costs, workforce wastages and higher labor costs, higher replenishment lead-time, higher transportation costs, tension in the buyer-supplier relationship, product unavailability, loss of profit, poor customer service, etc.
... The first stream of related literature is about information sharing (Cachon and Fisher 2000;Li 2002;Zhang 2002;Jain et al. 2011;Shang et al. 2016;Huang and Wang 2017;Huang et al. 2019;Li et al. 2020;Thomas and Mahanty 2021;Zhang and Nault 2022;Xu et al. 2023). The majority of studies show that retailers do not voluntarily offer their information to other chain members (Li and Zhang 2002;Zhang et al. 2019). ...
With the rapid development of e-commerce platforms, more and more attention has been paid to the information asymmetry between the platform and upstream firms. This paper investigates the information-sharing strategy for an e-commerce platform on which two competing original equipment manufacturers outsource their manufacturing services to a common contract manufacturer and sell substitutable products directly to consumers. A game-theoretic model is employed to examine six information-sharing scenarios, and we derive the following results. First, the platform always voluntarily offers its demand information to other chain members when the contract manufacturer is the leader in the market. In particular, the platform obtains the most profit when it shares the information only with the contract manufacturer. Second, both the contract manufacturer and the original equipment manufacturers can benefit from information sharing. Information sharing can also help to increase the profit for the whole supply chain. Contrary to intuition, the whole supply chain is most profitable when the information is shared only with the contract manufacturer. Third, if the contract manufacturer gets the information, the profit for each member will increase with the demand forecasting accuracy. In addition, this paper explores the impacts of different leader–follower relationships on information sharing in the extension section. It is shown that when the original equipment manufacturers are the leaders and the contract manufacturer is the follower, the platform does not always share the information with others, and its information-sharing strategies change significantly.
... Contrastamos el valor del intercambio de la información con otros dos beneficios de la tecnología de la información, el procesamiento de pedidos más rápido y más barato, lo que lleva a tiempos de entrega más cortos y tamaños de lote más pequeños, respectivamente. (Cachon 2000) 5 En la siguiente figura se explica el proceso de esta investigación Fig. 2. Diagrama del proceso metodológico. ...
En este artículo se presentarán las principales causas que presentan las empresas en su proceso de abastecimiento, además de como estas están afectando directamente a la promesa de entrega. La promesa de entrega en una Empresa debe considerarse como el indicador mas importante, esta evalúa la satisfacción del cliente en cuanto a la calidad de la entrega y el tiempo de la misma. Muchos autores han hablado a través del tiempo sobre las diferentes causas del desabastecimiento en el proceso logístico; como Empresa es importante conocer que existen estas causas y cual de ellas es la que mas impacta en la satisfacción del cliente. Se mencionará a los autores que han estudiado estas causas, analizaremos sus conclusiones y confrontaremos con la contemporaneidad de Colombia.
... The requirement for the troops to provide itself with food, ammo, and weapons as they travelled from base to base appears to be where inventory first appeared (Cachon & Fisher, 2000). The idea of inventory as a commercial notion did not emerge until the 1950s as a result of the increasing complexity of sourcing resources and releasing products in a global supply chain and inventory management (Cecil & Robert, 2006). ...
Citation: Olanipon, O. O., Akinola, A. A., & Oladele, M. A. (2022). Inventory management and organisational performance in tertiary healthcare institutions in Southwest Nigeria. FUOYE Journal of Finance and Contemporary Issues, 3(2), 201-220. Abstract The study focused on the various types of inventory management practices used in the study area's tertiary healthcare institutions and examined the factors that affected the adoption of inventory/stock management strategies there. The investigation employed first-hand data. University College Hospital in Ibadan, Lagos University Teaching Hospital, and Obafemi Awolowo University Teaching Hospital Complex in Ile-Ife are the three federal tertiary healthcare facilities selected for Southwest Nigeria. Selected employees from the procurement unit, pharmacy, store/supply, stock/inventory, and general store units were surveyed for the study in order to gather information. These units were deliberately picked since they are in charge of the institutions' inventory management processes. To analyse the data gathered, descriptive and inferential statistics were employed. The results or findings derived from the first objective showed that Economic Order Quantity as one of the inventory management practices has an average mean of 3.84; while Just-in-time has 3.95; Continuous replenishment has 3.76, and ABC analysis has an average mean of 3.77. However, further analysis showed the result of the correlation coefficients of individual factors (product type, t= 4.875, p < 0.05; lead-time method, t= 8.962, p < 0.05; product demand, t= 2.597, p < 0.05) determining the adoption of inventory practices by tertiary healthcare institutions. The study concluded that tertiary healthcare institutions in Southwest Nigeria are familiar with inventory management practices tested in the study namely EOQ, JIT, CR, and ABC analysis. It also concluded that product types, products demand and lead-time significantly influenced the adoption of inventory management practices by tertiary healthcare institutions in Southwest Nigeria. The study made the following recommendations; firstly, all the units involve in relation to inventory management handling should embrace full use of the types of inventory management practices on how appropriate each is to different medical materials that will improve the performance of the tertiary healthcare institutions, also certain factors such as lead time, product types, product demand and product prices should be considered before the adoption of any type of inventory management practices.
In the context of the development of the new period, the pharmaceutical supply chain market is gradually changing from a seller’s market to a buyer’s market. The closer the pharmaceutical supply chain market is to the consumer, the greater the market’s pricing power, so the market power of the pharmaceutical manufacturer and the retailer has changed, and the change in output and demand has increased accordingly. Since the supply chain is uncertain, there are internal and external risks. Retailers and suppliers can operate and coordinate effectively based on their core strengths, improve their ability to avoid internal and external risks and repair flexibly so that the supply chain is relatively balanced and stable. This paper studies the coordination problem of pharmaceutical supply chain stability from the uncertainty of pharmaceutical supply and market demand, establishes a revenue function, and proposes a collaborative decision-making optimization model of "revenue-sharing + margin" according to the revenue function, and further The optimal value interval is given through numerical analysis to realize the Pareto improvement of both parties. The impacts on the expected returns of suppliers and retailers are investigated through the revenue sharing coefficients and margins, which are numerically verified and discussed through examples. The analysis results show that under the collaborative decision-making of "revenue sharing + margin" in the pharmaceutical supply chain, the coordination of revenue sharing between retailers and suppliers can be optimized by adjusting the revenue sharing coefficient and margin.
We examine whether the risk of losing proprietary information through the supply chain affects relationship‐specific investment (RSI) decisions by supply chain partners. Using state courts' staggered adoption of the Inevitable Disclosure Doctrine (IDD) as a shock to the firm's ability to protect proprietary information, we find that customers increase RSI when their supplier is headquartered in a state that adopts IDD. The effect is more substantial for customers who face a higher risk of losing proprietary information and with suppliers that are difficult to substitute. IDD also plays a more prominent role in the absence of alternate mechanisms that reduce contracting frictions, such as shared directors, common ownership, or joint ventures. Our results are robust to using cross‐citation measures of RSI and alternative estimations that mitigate potential biases arising from the staggered difference‐in‐difference approach. Our findings suggest that proprietary information protection enables firms to reduce contracting frictions arising in supply chain relations.
Governments across the developing world are adopting digital technologies to improve performance of public sector supply chains. However, empirical evidence regarding the impact of these technologies on performance is mixed. In this paper, we evaluate the impact of using Biometric Authentication (BA) devices on the performance of India’s food security program. The program aims to deliver subsidized food grains to nearly 160 million low-income households through approximately 500,000 Fair Price Shops (FPSs). Nearly half of those grains do not reach the beneficiaries and are diverted to the open market for private benefit. We estimate the impact of installing BA devices on reducing diversion in more than 3,300 FPSs in the Indian state of Karnataka between 2013 and 2015 using a difference-in-differences approach. We find that BA devices reduce up to 4% of the current diversion at the last mile. We argue that this relatively low impact is due to the presence of a workaround mechanism which results in imperfect monitoring and validate the decrease in diversion mechanism by estimating differential impact of BA devices. We complement the empirical analysis with a simulation exercise to estimate additional value that can be unlocked by using the BA devices. We find that the value of better replenishment planning using sales and inventory information captured by BA devices can be significant. The value of better planning can be as high as six times the value from reduction in diversion, depending on the pre-intervention levels of demand from genuine beneficiaries and diversion at the FPSs.
Purpose - This study investigates the extent to which a firm’s centrality and autonomy in its supply network are associated with the intensity and complexity of its competitive actions.
Design/methodology/approach - Utilizing social network analysis and dynamic panel data models, this study analyzes a comprehensive panel dataset with 10,802 firm-year observations across various industries between 2011 and 2018 to test the hypotheses.
Findings - Our findings show that a firm’s level of centrality in its supply network has an inverted U-shaped relationship with both competitive intensity and competitive complexity. In addition, the turning points of these two inverted U-shaped relationships differ in that firms with a lower level of centrality tend to compete aggressively by launching more actions within fewer categories, while firms with a higher level of centrality tend to compete aggressively by launching fewer actions that cover a larger range of categories. Finally, we find that a firm’s structural autonomy has a positive relationship with competitive complexity.
Originality/value - This study bridges the gap between the supply chain management literature and strategic management literature and investigates how supply networks shape competitive aggressiveness. In particular, this research investigates how a firm’s structural position in its supply network affects its competitive actions, an important intermediate mechanism to competitive advantage that has been overlooked in the supply chain management literature.
Firms’ multilevel access to information plays a significant role in improving operating performance. Increasingly, firms are enhancing their operational integration through IT as they grapple with intense competition. Competition networks are an essential but often overlooked source of information that, if leveraged correctly, can provide firms with significant competitive and operational advantages. In this study, we develop a multilevel research model of operating performance (firm level) that simultaneously considers the effects of IT for operational integration (ITOI, firm level) and competitive brokerage (competition network level). We explicate how ITOI and competitive brokerage afford firms’ synergy through complementarities and relatedness of competitive actions, information, and resources to improve their operating performance. We assess the model using a 7-year longitudinal secondary dataset that includes firms from multiple industries and find support for our thesis that ITOI and competitive brokerage have a synergistic effect on operating performance. Our exploratory analysis uncovers innovation efficiency as a theoretical mechanism underlying the relationships between ITOI, competitive brokerage, and operating performance. Further exploratory analyses with disaggregated measures of ITOI highlight that synergies arise from IT-enabled coordination and integration across the supply chain and within functional areas of an organization. These findings are robust to concerns of endogeneity and alternative model specifications. We make three critical contributions to our collective understanding of the relationship between IT and operating performance — synergy as a means through which operating performance is realized, a multilevel model of relationships, and a nuanced understanding of the relationships between ITOI, competitive brokerage, and operating performance. Overall, we provide a summative view of the multilevel effects of IT on operating performance.
This chapter provides an overview of the concept of Supply Chain Flows (SCF). While the normative literature in Supply Chain Management (SCM) emphasizes the importance of three primary flows – material, information, and finance – recent challenges, notably the COVID-19 pandemic, have highlighted the prominence of likely additional flows. This chapter delves into four such flows – human, knowledge, equipment, and technology – that significantly impact supply chain performance. This exploration prompts a reevaluation of traditional SCF scope. Theoretical approaches for effectively managing the interactions among SCF are also proposed. The chapter concludes by suggesting future directions in establishing a consensus-based SCF framework. Overall, this chapter provides a foundation for ongoing efforts to enhance SCF understanding and develop additional theoretical insights for SCM researchers and practitioners.
Existing literature offers multiple interpretations of how managers might develop and deploy supply chain visibility (SCV). However, current visibility research lacks rigorous definitions of visibility types and their relationships to contextual factors. Our systematic literature review and analysis extends previous studies by identifying visibility objects, potentially important contextual characteristics, and their interrelationships. We highlight research trends and develop a framework that links types of visibility to relational, environmental, and operational characteristics that either support visibility development or moderate its value for a firm. In addition, we offer a synthesis and critique of research questions, theoretical perspectives, and methods researchers have used to address SCV concepts and relationships. The review findings suggest rich opportunities for future research.
An imperative issue that impedes economic, social, and environmental progress is the involvement of the middle tier in public institutions. Due to inadequate transparency and clandestineness in establishments, the trust in procurement process has become a predominant concern that affects many nations around the world. Governments across the globe have begun exploring cutting-edge technologies to improve procurement transparency and integrity. Blockchain is an emerging technology that comprises the potential for generating substantial advancement in the public procurement domain by establishing transparent, immutable, and autonomous processes. Even though contributions are constantly rising, adequate research and implementation are pivotal in order to fully comprehend the technology to attain these advantages. In this study, the typical procurement process was examined to evaluate the associated issues and how the digitization of the process through Blockchain technology can mitigate them by using digital identities towards maintaining the security and privacy of the entity.
The growing complexity of supply chains and the increase in risks make communication between supply chain actors in these chains crucial to reduce the risks inherent there. Indeed, each supply chain forms a communication node between a large number of highly interconnected actors (producers, suppliers, transporters, distributors, retailers, and customers). Information sharing, information systems, and technology as some of the most important components of this communication and contribute to the reduction of risks surrounding the activities carried out by actors within supply chains. This paper presents a review of the literature on the importance of communication between supply chain actors. It explores the impact of information sharing on the quality and effectiveness of communication within a supply chain and highlights the importance of information systems and technology to ensure effective communication between its actors. The influence of this effective communication on supply chain risk reduction is also discussed. In addition, the main supply chain risks reduced by an effective communication system are as well examined.
In this paper, we study how provision of product information and/or market information affects buyers' and sellers' behavior and the resultant sales in an online marketplace. We first identify the Pareto‐dominant equilibrium for the sellers' pricing decisions. Then, we study the impact of market parameters on the sales of the platform in equilibrium, under various information structures. We find that the platform's sales increase with the size of potential buyers but change nonmonotonically with the size of potential sellers. Next, we analytically characterize the platform's optimal information strategy as a function of the underlying market parameters. We find that while it is always optimal for the platform to reveal some information, it should be strategic about which information to reveal when faced with different supply and demand conditions. In particular, in a seller's market (high ratio of potential buyers to sellers), the platform should provide both product and market information to the sellers and buyers. However, in a buyer's market (low ratio of potential buyers to sellers), it is optimal for the platform to only provide the market information—providing both the product and market information would backfire on the platform by jeopardizing its sales.
We study the conditions that influence judgmental forecasting effectiveness when predicting demand in the context of fashion products. Human judgment is of practical importance in this setting. Our goal is to investigate what type of decision support, in particular historical and/or contextual predictors, should be provided to human forecasters to improve their ability to detect and exploit linear and nonlinear cue-criterion relationships in the task environment. Using a field experiment on new product forecasts in the music industry, our analysis reveals that when forecasters are concerned with predictive accuracy and only managerial judgments are employed, providing both types of decision support data is beneficial. However, if judgmental forecasts are combined with a statistical forecast, restricting the decision support provided to human judges to contextual anchors is beneficial. We identify two novel interactions demonstrating that the exploitation of nonlinearities is easiest for human judgment if contextual data are present but historical data are absent. Thus, if the role of human judgment is to detect these nonlinearities (and the linearities are taken care of by some statistical model with which judgments are combined), then a restriction of the decision support provided would make sense. Implications for the theory and practice of building decision support models are discussed.KeywordsJudgmental forecastingFashion productsLens model designDemand uncertaintyMusic industryNew product forecasting
In this paper, we consider an adaptive base-stock policy for a single-item inventory system, where the demand process is nonstationary. In particular, the demand process is an integrated moving average process of order (0, 1, 1), for which an exponential-weighted moving average provides the optimal forecast. For the assumed control policy we characterize the inventory random variable and use this to find the safety stock requirements for the system. From this characterization, we see that the required inventory, both in absolute terms and as it depends on the replenishment lead-time, behaves much differently for this case of nonstationary demand compared with stationary demand. We then show how the single-item model extends to a multi-stage, or supply-chain context; in particular we see that the demand process for the upstream stage is not only nonstationary but also more variable than that for the downstream stage. We also show that for this model there is no value from letting the upstream stages see the exogenous demand. The paper concludes with some observations about the practical implications of this work.
(This article originally appeared in Management Science, April 1997, Volume 43, Number 4, pp. 546--558, published by The Institute of Management Sciences.) Consider a series of companies in a supply chain, each of whom orders from its immediate upstream member. In this setting, inbound orders from a downstream member serve as a valuable informational input to upstream production and inventory decisions. This paper claims that the information transferred in the form of ÜordersÝ tends to be distorted and can misguide upstream members in their inventory and production decisions. In particular, the variance of orders may be larger than that of sales, and distortion tends to increase as one moves upstreamÔa phenomenon termed Übullwhip effect.Ý This paper analyzes four sources of the bullwhip effect: demand signal processing, rationing game, order batching, and price variations. Actions that can be taken to mitigate the detrimental impact of this distortion are also discussed.
Many companies have embarked on initiatives that enable more demand information sharing between retailers and their upstream suppliers. While the literature on such initiatives in the business press is proliferating, it is not clear how one can quantify the benefits of these initiatives and how one can identify the drivers of the magnitudes of these benefits. Using analytical models, this paper aims at addressing these questions for a simple two-level supply chain with nonstationary end demands. Our analysis suggests that the value of demand information sharing can be quite high, especially when demands are significantly correlated over time.
This paper develops a new model for studying multiechelon inventory systems with stochastic demand. For the model we assume that each site in the system orders at preset times according to an order-up-to policy, that delivery times are deterministic, and that the demand processes are stochastic with independent increments. We introduce a new scheme for allocating stock in short supply, which we call virtual allocation and which permits significant tractability. We exercise the model on a set of test problems for two-echelon systems to get insight into the structure of good policies. The primary findings are that both the central warehouse (upper echelon) and the retail sites (lower echelon) should hold safety stock, but that most of the safety stock should be at the retail sites. Consequently, the central warehouse will stock out with high probability. Furthermore, we show that the virtual allocation rule is near optimal for the set of test problems.
In the last several years there have been a number of papers discussing optimal policies for the inventory problem. Almost without exception these papers are devoted to the determination of optimal purchasing quantities at a single installation faced with some pattern of demand. It has been customary to make the assumption that when the installation in question requests a shipment of stock, this shipment will be delivered in a fixed or perhaps random length of time, but at any rate with a time lag which is independent of the size of the order placed. There are, however, a number of situations met in practice in which this assumption is not a tenable one. An important example arises when there are several installations, say 1, 2, ..., N, with installation 1 receiving stock from 2, with 2 receiving stock from 3, etc. In this example, if an order is placed by installation 1 for stock from installation 2, the length of time for delivery of this stock is determined not only by the natural lead time between these two sites, but also by the availability of stock at the second installation. In this paper we shall consider the problem of determining optimal purchasing quantities in a multi-installation model of this type.
We incorporate information flow between a supplier and a customer in a two-echelon model that captures the capacitated setting of a typical supply chain. We consider three situations: (1) a traditional model where there is no information to the supplier prior to a demand to him except from past data; (2) the supplier has the information of the (s,S) policy used by the customer as well as the end-product demand distribution; and (3) the supplier has full information about the state of the customer. We show that order up-to policies continue to be optimal for models with information flow for the finite horizon, the infinite horizon discounted and the infinite horizon average cost cases. We develop solution procedures to compute the optimal parameters. Study of these three models enables us to understand the relationships between capacity, inventory and information at the supplier level and how they are affected by customer S Gamma s values and end-item demand distribution. We...
A two-echelon distribution inventory system is studied with a central warehouse and N retailers. A method is presented for exact evaluation of control policies that provides the complete probability distributions of the retailer inventory levels. All important consequences of different continuous review installation stock (R,Q) policies are analyzed.
We consider a serial inventory system with N stages. The material flows from an outside supplier to stage N, then to stage N - 1, etc., and finally to stage 1 where random customer demand arises. Each stage replenishes a stage-specific inventory position according to a stage-specific reorder point/order quantity policy. Two variations of this policy are considered. One is based on echelon stock, and the other installation stock. The former requires centralized demand information, while the latter does not. The relative cost difference between the two policies is called the value of centralized demand information. For fixed order quantities, we develop efficient algorithms for computing both the optimal echelon reorder points and the optimal installation reorder points. These algorithms enable us to conduct an extensive computational study to assess the value of centralized demand information and to understand how this value depends on several key system parameters, i.e., the number of stages, lead times, batch sizes, demand variability, and the desired level of customer service.
We consider a two-level inventory system with one warehouse and N identical retailers. Lead times (transportation times) are constant and the retailers face independent Poisson demand. In a previous paper [ibid. 38, No. 1, 64-69 (1990; Zbl 0715.90039)], we derived a recursive procedure for determining the policy costs for an average item in case of one-for-one replenishment policies. In this paper, we show how these results can be used for the exact or approximate evaluation of more general policies where both the retailers and the warehouse order in batches. We compare our methods to the method recently suggested by A. Svoronos and P. Zipkin [‘Evaluation and optimization of one- for-one replenishment policies for multiechelon inventory systems’, Grad. School of Business, Columbia University, New York (1986)].
B. Deuermeyer and L. B. Schwarz [in: Multilevel production/inventory control systems: theory and practice, TIMS Stud. Manage. Sci. 16, 163-193 (1981; Zbl 0469.90031)] have developed a very simple approximation of a complex multi-echelon system. Here we propose several refinements of their techniques, leading to models nearly as simple and considerably more robust. Our analysis suggests guidelines for the design of large-scale logistics systems, differing markedly from those of earlier studies. An algorithm is developed for calculating the probabilities of the number of busy devices in two and three sequential completely accessible groups (of devices) in the case of servicing of the flow with losses and a simple after-effect. Expressions are found for determining the throughput of the first, last, and any intermediate device of a completely accessible group in the case of ordered occupation (of devices). It is shown that the throughput of the last device differs from the increment in the throughput of the system resulting from the addition of one device to the system.
We consider a one-warehouse,N-identical-retailer model. Random demands occur at the retailers with complete backlogging. The retailers replenish their inventories from the warehouse, which in turn orders from an outside supplier with unlimited stock. Each retailer places an order everyN periods according to a base-stock policy, and the reorder intervals of the retailers are staggered so that only one retailer places an order in each period. The warehouse orders according to an ( s, S) policy based on its own inventory position. We consider two allocation policies, past priority allocation (PPA) and current priority allocation (CPA), which specify how the retailer orders are filled at the warehouse. For the PPA model, we provide an exact procedure for computing the long-run average total cost. Based on the exact procedure, we develop an approximate model that can be used to determine near-optimal control parameters for both the PPA and the CPA model. We conduct a computational study to test the effectiveness of the approximate model and to compare the performance of the two allocation policies.
We consider a distribution system with a central warehouse and multiple retailers. The warehouse orders from an outside supplier and replenishes the retailers which in turn satisfy customer demand. The retailers are nonidentical, and their demand processes are independent compound Poisson. There are economies of scale in inventory replenishment, which is controlled by an echelon-stock, batch-transfer policy. For the special case with simple Poisson demand, we develop an exact method for computing the long-run average holding and backorder costs of the system. Based on this exact method, we provide approximations for compound Poisson demand. Numerical examples are used to illustrate the accuracy of the approximations. We also present a numerical comparison between the average costs of a heuristic, echelon-stock policy and an existing lower bound on the average costs of all feasible policies.
This paper discusses the relationship between business process reengineering and channel performance for firms implementing electronic data interchange (EDI) linkages within the U.S. grocery industry. Both quantitative and qualitative data sources are combined to test the hypothesis that channel transformation involving adoption of EDI and redesign of replenishment processes enables performance improvements more than an order of magnitude greater than implementation of EDI alone. This new process, enabled by EDI, provides retailers with 50- 100% higher inventory turns for products on continuous replenishment processes (CRP) relative to retailer performance using traditional ordering processes. Firms adopting EDI without using CRP to reengineer the ordering processes have failed to realize any statistically significant improvements in either inventory levels or warehouse stockouts. This research provides evidence to support the claims of process reengineering that are common in the popular business press, but for which statistically significant empirical evidence is minimal. The findings of the research also demonstrate the potential improvements that firms can realize through extending the business process reengineering concept to include the firms' entire supply chain.
Campbell Soup's continuous replenishment (CR) program is a novel innovation designed to improve the efficiency of inventory management throughout the supply chain. With CR (1) retailers pay a constant wholesale price but continue to participate in consumer promotions, (2) retailers transmit to the supplier daily inventory information via electronic data interchange (EDI), and (3) the supplier assumes responsibility for managing retailer inventories, i.e., vendor managed inventories (VMI). We develop simple inventory management rules to operate CR, and we test these rules with a simulation using actual demand data provided by Campbell Soup. On this sample we find that retailer inventories were reduced on average by 66% while maintaining or increasing average fill rates. This improvementreduces a retailer's cost of goods sold by 1.2%, which is significant in the low profitmargin grocery industry. Furthermore, these savings could have been achieved without VMI.
We model the effects of alternative coordination structures on the performance of a firm that faces uncertain demand in multiple horizontal markets. The firm's coordination structure is jointly determined by its decision-rights structure and by its information structure. We compare the performance of decentralized, centralized and distributed structures and study factors that affect the value of coordination. The results quantify and illustrate the value of co-locating decision rights with specific knowledge.
We establish lower bounds on the minimum cost of managing certain production-distribution networks with setup costs at all stages and stochastic demands. These networks include serial, assembly, and one-warehouse multi-retailer systems. We obtain the bounds through novel cost-allocation schemes. We evaluate the bounds' performance for one-warehouse multi-retailer systems by comparing them with simple, heuristic policies. The bounds are quite tight for systems with a small number of retailers. We also present simplified proof of known optimality results for serial and assembly systems.
For a system of N-identical-retailers we construct a model for determining warehouse inventory-allocation policies which minimize system lost sales per retailer between system replenishments. An allocation policy is specified by: (a) the number of withdrawals from warehouse stock; (b) the intervals between successive withdrawals; (c) the quantity of stock to be withdrawn from the warehouse in each interval; and (d) the division of withdrawn stock among the retailers. We show that in the case of two withdrawals, available stock in each interval should be divided to “balance” retailer inventories.
We also develop an infinite-retailer model and use it to determine two-interval allocation heuristics for N-retailer systems. Simulation tests suggest that the infinite-retailer heuristic policies are near-optimal for as few as two retailers. Simulation tests indicate that the risk-pooling benefits of allocation policies with two well-chosen intervals are comparable to those of base-stock policies with four equal intervals.
In multi-echelon repairable inventory systems with high set-up cost for order and/or high demand rates, the use of batch ordering may be more cost-effective than the common (S - 1, S) ordering policy. This paper addresses the issue of determining the optimal order batch size and stocking levels at the stocking locations in such a system. A power approximation is used to estimate the total system stock and backorder levels from which the optimal batch size can be readily determined. A search routine involving "one-pass" searches are then followed to obtain the stocking levels at the depot and the local sites of the system. This procedure has been evaluated using 900 test cases and has been found to be very effective. The power approximation approach also results in a simple analytical relationship to test whether or not (S - 1, S) is an optimal ordering policy for repairable items in a multi-echelon environment.
Electronic Data Interchange (EDI) and related technologies are making it less expensive to frequently transmit demand information up the supply chain from the point of sale. However, little is known about how the various participants in the supply chain might exploit more timely demand information. This research is intended to be an opening contribution to the analytical study of timely demand information. We study a simple two-level system composed of a supplier (or component plant) and a single customer (or final assembly plant). The two factories use a standard periodic base-stock policy for one particular item, but the equal-length production cycles of the two factories do not necessarily coincide. Both participants hold inventories to buffer the effects of uncertain orders and uncertain deliveries. The supplier is in turn supplied by a source with infinite capacity. Final demand occurs only at the final assembly plant, which communicates demand over its order cycle to the component plant. If the component plant begins a production cycle between orders from the final assembly plant, it is uninformed about some number of days' demand which has been observed at the customer but not yet communicated. Any technology, such as EDI, that makes it cheaper for the customer to communicate demand as it occurs allows the supplier to base its decisions on more accurate information. With more accurate demand information the supplier could reduce inventories, or improve the reliability of its deliveries to its customer, or both. The customer, in turn, could reduce its inventories if its supplier were more reliable. We examine the changes brought about by the exchange of timely demand information in inventories and service levels at both the supplier and customer. Our results show that inventory-related benefits are particularly sensitive to demand variability, the service level provided by the supplier, and the degree to which the order and production cycles are out of phase.
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Efficient Consumer Response: Enhancing Consumer Value in the Grocery Industry Food Marketing Institute Batch size and stocking levels in CACHON AND FISHER Supply Chain Inventory Management Management Science multi-echelon repairable systems
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