Supply chain dynamics: analysis of inventory vs. order oscillations trade-off

Supply chain dynamics: analysis of inventory vs. order oscillations trade-off

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Article ID: iaor20061896
Country: United Kingdom
Volume: 44
Issue: 6
Start Page Number: 1037
End Page Number: 1054
Publication Date: Jan 2006
Journal: International Journal of Production Research
Authors: ,
Keywords: programming: linear
Abstract:

The use of Advanced Planning Systems (APS) has become widespread in many industries. This paper presents an analysis of how safety stock policies, as modelled in many APSs, can induce variation in production and distribution order quantities along the supply chain. The effect is illustrated using a system dynamics model of the supply chain of a Mexican branch of a multinational food and beverage company. Real demand data are used in the simulation. An explanation is provided for these production order distortions and modifications to the operating policies and the APS linear programming model are proposed to reduce these effects. Computational results and illustrative examples are presented.

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