Inventory Management Strategies for Integrated Multileveled Systems

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MAGAZINE №3 (80) June 2017

AUTHORS  

LUKINSKIY V.V.

ASLAKHANOV A.R. - Department of Management, National Research University Higher School of Economics (St. Petersburg, Russia)

CATEGORY  Inventory management Optimization and mathematical modelling Supply chain management

ABSTRACT

The great variety of inventory management models is known in inventory management theory. All of them are divided into two groups: first group is based on the optimal amount of order and the other is based on the fixed time between adjacent deliveries. Existing models are appropriate for the situations with determined demand per day and delivery time while in practice these two key parameters are variables and change in accordance with the certain law of distribution. Also, existing models do not usually take into account the variety of conditions, that exist in practice and effects the performance of supply chain, namely: discounts in dependence with order amount, product shelf life, amount of safety stocks on SC different levels, penalties for the deficit ant etc. The most interesting condition is the multilevel structure of stocks placement. It requires to take into account existence of not only focus companies inventories but also, for example, raw material and manufacturer packaging inventories, finished goods inventories at the distributorsэ warehouses and inventories of other levels of SC during the optimization of the total logistical costs of the supply chain. Special conditions mentioned above makes the objective of making practically applicable mathematical model for the total logistics costs of the SC optimization extremely hard to solve. The EOQ model is the most known one. Despite its popularity it has several crucial implementation conditions: determinate values of demand and length of logistic cycles; safety stock existence on different levels of supply chain and deficit costs are ignored; model considers local optimization – EOQ minimizes total logistics costs of given level of SC. Formulas for the two main inventory management strategies were found: based on the fixed order amount and based on the period between adjacent deliveries.

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