The development of a simulation-based approach to optimise the inventory policy in a single-echelon supply chain: a case study

Authors:
A. Mahamani;K. Prahlada Rao;V. Pandurangadu
Affiliations:
Mechanical Engineering, Sri Venkateswara College of Engineering and Technology, Chittoor-517127 (A.P.), India.;Mechanical Engineering, JNTU College of Engineering, Anantapur-515002 (A.P.), India.;OTRI, JNT University, Anantapur-515001 (A.P.), India
Venue:
International Journal of Data Analysis Techniques and Strategies
Year:
2008

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Abstract

Inventory control is one way to increase profit margins without altering resources. A spreadsheet model was developed for the inventory control of packaging material in a real case study from a fruit juice manufacturing firm. The contribution of this paper is the construction of a spreadsheet model that incorporates a dynamic re-order point policy logic; using the result from the spreadsheet-based approach and analytical approximation method, a best alternate ordering policy for a single-echelon supply chain can be developed by the statistical analysis of the dynamic re-order point, static re-order point and existing ordering policies and the flexibility of the optimal ordering policy was evaluated using a randomly generated demand. The objective of this work is to develop the best ordering policy with a low total inventory cost to ensure a better service efficiency level across a single-echelon supply chain. The reduction in the total inventory costs obtained from the spreadsheet-based approach is compared with the analytical approximation method. This paper provides a basic understanding with respect to the development of an ordering policy for a single-echelon supply chain.