A customer satisfaction inventory model for supply chain integration

Authors:
C. Y. Lam;W. H. Ip
Affiliations:
Department of Industrial and Systems Engineering, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong;Department of Industrial and Systems Engineering, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong
Venue:
Expert Systems with Applications: An International Journal
Year:
2011

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Abstract

Customer relationship is increasingly influencing the performance of inventory management in a supply chain, and customer retention or migration directly affect the number of customer orders and demands as well as the inventory level. Therefore, the aim of this paper is to propose a customer satisfaction inventory (CSI) model that incorporates customer relationship management into an inventory model, where the probabilistic concepts of Markov chains of uncertainties in customer relationships of retention or migration are adopted. This enables us to determine both a CSI level for replenishing the inventory level to best fit future customer demand and a customer CSI value of the net profit or loss of an organization from a customer over its purchasing life against the inventory cost of an organization. The modeling and development of the proposed customer satisfaction inventory CSI model are discussed in this paper. Simulation and analysis are conducted for the proposed model, and satisfactory results are achieved, such that the proposed model can help to determine a CSI level that can fully meet orders and demand as well as minimizing inventory cost and maximizing CSI value.