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Research on Optimal Inventory Control Strategies Based on Risk Pooling in Supply Chain

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Posted by Basic Science on March 18, 2012 at 7:44 am
Title Research on Optimal Inventory Control Strategies Based on Risk Pooling in Supply Chain

As economic globalization deepens, so is the competition based on supply chain. IT is obvious that better inventory control means better customer satisfaction as to their diverse needs and generally less operational costs. Put in another way, better inventory control equals to more competitive edges. Thus, relevant researches on improvement of inventory control, both from theoretical and practical perspectives, turn out to be very helpful and of much significance. In this thesis, approaches to centralized supply chain inventory control based on risk pooling are proposed on the basis of risk pooling, which are of much importance in the improvement of inventory control of supply chains.Backing by relevant theories concerning supply chain management, inventory control and etc., analysis and research is made with regard to inventory control under the circumstance of supply chain.In view of tackling problems in inventory management, we initially take a close look at four mainstream inventory control approaches, including DIM (decentralized inventory management), VMI (vendor managed inventory), JMI (Jointly managed inventory) and CPFR (collaborative planning, forecasting and replenishment). With that basis, we propose a centralized inventory decision-making mechanism based on risk pooling.Our next effort goes to the presentation of a single-period perishable inventory model involving inventory costs. With the help of this model, we obtain inventory cost expectations and profit expectations, respectively in centralized inventory systems based on risk pooling and distributed inventory systems with non-risk pooling. Meanwhile, impacts on risk pooling revenue from market demand correlation and coefficient of demand variation are also studies.Then we analyze its risks in risking pooling process in inventory control and its emerging problems in perspective of inventory costs, service levels, managing costs, customer lead times and transportation costs. To deal with above mentioned problems, information sharing in supply chain is a good choice. Our key analysis is centered on its value analysis in risk pooling in supply chain.We obtained the following results:(1)The advantages of risk pooling lie in its capabilities of decreasing inventory costs while keeping customer service level stable; or with unchanged inventory costs, improving customer service.(2)The effects of risk pooling are also to partly be decided by the correlation of different patterns of market demand changes. If the correlation coefficient between these two markets is minus, revenues obtained out of risk pooling will increase and if plus, decrease.(3)Inventory cost decrease in risk pooling is strongly affected by demand variation coefficient. The bigger the coefficient is, the more revenues will be obtained out of centralized systems and the higher risk absorption level IT will be.(4)In centralized inventory systems, overall cost is to be cut down on with the help of inventory hub with hurting customer service–overall optimization is attained; while in decentralized systems, only local optimization could be attained due to respective decision-making by each inventory hub.(5)Risks of centralized inventory control policies can be well reduced with the help of information sharing in supply chains, prolonged product diversities, product substitution and different inventory policies for different kinds of products.

Category Basic Science
Keywords Centralized Inventory Control, Decentralized inventory, information sharing, Risk Pooling, Supply Chain,
FileType PDF
Pages 131
Price US$48.00
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