Optimal cycle time and inventory decisions in coordinated and non-coordinated two-echelon inventory system under inflation and time value of money

In this paper, a mathematical model is developed for a coordinated and non-coordinated two-echelon inventory system comprising of a single manufacturer and a single retailer. The objective of the model is to demonstrate the optimality of cycle time and inventory decisions under the phenomena of different inflation rates at the manufacturer and retailer points. Also, it is aimed at determining the annual net revenue of the supply chain (SC). In the proposed model, the present value of the inflated ordering/set-up costs, purchase/unit costs, carrying costs and the gross revenue is computed for the retailer, manufacturer and the SC. A numerical example is devised to illustrate the optimality of decision variables and the objective function. Also, the sensitivity analysis is carried out. Results show that the present value of the annual net revenue of the retailer, manufacturer and SC decreases with increased inflation rate at the retailer and decreased inflation rate at the manufacturer simultaneously.     

The money value of citations to single-authored and multiple-authored articles

This note presents evidence for the surprising conclusion that a citation to a multiple-authored article is worth more to its author than a citation to a single-authored article.     

On the money value of peer review

Scientometrics - Peer review is commonly recognized among the cornerstones of the scientific publishing system and, less narrowly, of scientific production in general. Although it plays such a...     

Overturning some assumptions about the effects of evaluation systems on publication performance

In 1989 the Spanish Government established an individual retrospective research evaluation system (RES) for public researchers. Policy makers have associated the establishment of this evaluation system with the significant increase in the volume of scientific publications attributed to Spain over the last decades. In a similar vein to the analyses of other country cases, some scholars have also claimed that the growth of Spain’s international scientific publications is a result of the establishment of the new evaluation system. In this paper, we provide a methodological revision of the validity threats in previous research, including some interrupted time-series analyses and control groups to investigate the effects of this policy instrument on the number of papers produced by Spanish authors. In the years following the establishment of the evaluation system, the results indicate a considerable increase in the number of papers attributed to Spanish authors among those eligible for evaluation (the “treated” group), but also in the control groups. After testing various alternative explanations, we conclude that the growth in Spanish publications cannot be attributed indisputably to the effect of the establishment of the RES, but rather to the increase of expenditure and number of researchers in the Spanish R&D system along with some maturation effects. We take this case as an example of the need to improve and refine methodologies and to be more cautious when attributing effects to research evaluation mechanisms at the national level.     

The interaction of location and inventory in designing distribution systems

Many companies face the strategic decision of deciding on the number of Distribution Centers (DCs), their location, and which customers they serve. One objective for a company facing this decision is to maintain acceptable service while minimizing the fixed costs of operating the DCs, inventory holding costs at the DCs, and transportation costs between plants and DCs, and DCs and customers. For insight into this problem, we develop an analytical model for a stylized version of it. However, since the general version of the problem is NP-Hard, we also develop heuristic procedures. We solve a variety of example problems to test the performance of these heuristics relative to optimal solutions and a lower bound based on a relaxation of the original problem. Managerial insight based on our computational studies is provided. We also present a small case-study example motivated by our interaction with Frito-Lay, Inc     

On the dynamics of inventory control systems

This paper eals with the dynamics of a computer-based inventory control system. In general Buch a real-life system is designed according to the most basic principles of static inventory theory. To control the system in a dynamic sense, management has to vary the policy parameters of the system. Two different mathematical models of inventory dynamics are introduced. The first ie a simple first-order differential equation and the second a discrete multidimensional model. Applications of the two models are discussed with the aid of examples concerning, on the one hand, changes in policy parameters, and on the other production smoothing.     

The role of inventory banks in flow-line production systems

Many production managers of flow-line systems, such as in the steel and metal processing industries, observe the high levels of in-process inventories. They feel that it should be possible to reduce these inventories; however, before doing so it is necessary for them to understand their function. Although the general rule that inventories exist because of imbalance in supply and demand at a point within the system is true, it is necessary to show more precisely how such an imbalance might arise in single-product systems due to variability in processing times at the stations, or interruptions in production due to breakdown and subsequent repair of stations. Quantitative results have been obtained which indicate how such factors as the number, location and capacity of inventory bank, affect the system production rate. These results enable system designers and operators to check whether their systems could be improved.     

Component commonality effects on inventory costs

In this paper we study the effects of increasing component commonality for a single-period model. A two-product, two-level configuration under a general component cost structure is considered. The economic implications of replacing different products' components by common components are analyzed. We develop optimal solutions for the Commonality and Non-Commonality (Basic) Models and provide bounds on the total savings resulting from using commonality. We demonstrate, under general and specific component cost structures, that some forms of commonality may not always be a preferred strategy. Furthermore, we present conditions under which commonality should not be used. Finally, an extension to the two-product multicomponent model is provided.     

An improved ordering policy for continuous review inventory systems with arbitrary inter-demand time distributions

In this paper, we revisit the optimality of (s,S) policies in continuous review inventory models where demand forms a renewal process. We explain why when orders are placed at demand epochs, (s,S) policies are not optimal in general, and propose a simple but practical ordering policy by introducing a delay in order placement as a policy parameter. Under our proposed policy, the operating characteristics of such systems can be evaluated using the existing results in the literature. In order to demonstrate the effectiveness of our policy, we restrict our analysis to a special class of inventory systems where demand follows a counting process, fixed ordering costs are negligible and leadtimes are constant. We derive expressions for the operating characteristics of such systems under our policy and present insights on the behavior of the policy parameters which minimize the average total cost rate under our policy. Using these results, we develop an efficient heuristic for computing the policy parameters. Finally, we investigate the effectiveness of our policy in comparison to policies which place orders only at demand epochs. The results of our numerical experiment indicate that our policy can result in a significant savings.     

The impact of quality considerations on material flow in two-stage inventory systems

Supply chain management literature calls for coordination between the different members of the chain. Inventory models achieve this coordination along a supply chain by making the lot size at an upstream entity an integer multiplier of the lot size at the adjacent downstream entity. Such models assume that all components produced are of acceptable quality and may cause suppliers to produce larger quantities than what is optimal. In this paper, we formulate and solve two-stage supply chain inventory models in which the proportion of defective products increases with increased production lot sizes. We show that quality considerations can lead to significant reduction in production lot sizes. In addition, the models show that most benefits to the supply chain are attained from the suppliers producing on a just-in-time basis rather than delivering to their customers just-in-time. We derive closed-form expressions for the optimal lot sizes for a two-stage supply chain under deterministic and then stochastic demand and illustrate the models with numerical examples.     

The impact of restricting the flow of inventory in serial production systems

This research uses simulation technique to compare the output performance of pull production systems with different inter-station storage capacities (ISSC) under various levels of total inventory (INV) in the system, station coefficient of variation (CV), and station down-time (DT). There are two primary findings from this study. First, it shows pull systems with larger ISSC yield a significantly higher output at all levels of INV in the system, station CV, and station DT. Second, it shows that lines using a strict kanban-based pull system can increase output while decreasing WIP inventory simply by allowing the inventory to flow freely between stations. These are major findings considering that the modifications necessary in the system to achieve these results are fairly uncomplicated and should require minimal investment.     

A note on evaluating the risk in continuous review inventory systems

This paper is an attempt to evaluate the long term risk of stock-out and obsolescence in continuous review inventory systems, typically of slow-moving but very critical items. Inventory decisions depend very much on the goodness of the estimates of the input parameters like the holding, ordering and stock-out costs. It is a well-known fact that stock-out cost is a very difficult parameter to estimate. The lower it is the lower the quality of service will be while the higher it is the higher the inventory cost would be and possibly higher obsolescence rate too. In this paper, we develop a framework to evaluate the risks, in the long term, of stock-out and obsolescence, especially for inventory of critical spares whose demand rate is not high. For this purpose, we propose the use of quasi-stationary distributions for continuous review (r, Q) inventory systems with the condition that the Laplace transforms of functions of interest are rational algebraic functions. We relate the quasi-stationary distribution to the conditional tail expectation which is a coherent risk measure used in finance and actuarial studies. Numerical illustration is also provided.     

The value of sharing lead time information

The widespread adoption of Enterprise Resource Planning (ERP) systems has, among many other benefits, increased the ability of a firm to share operational data with customers. In this paper we analyze the factors that determine whether or not sharing a specific type of information, namely state-dependent lead time information, can benefit a firm. We develop a stochastic model of a custom-production environment, in which customers are handled on a first-come first-served basis but have differing tolerances for waiting. The firm has the option to share different amounts of information about the lead time a potential customer may incur. Although the information differs across scenarios, the reliability of that information in terms of the probability that a stated lead time is met is equal in the eyes of the customers. We derive conditions under which sharing more information with customers improves the firm's profits and the customers' experiences. We show that it is not always the case that sharing information improves the lot of the firm. We show that when customers' tolerances for waiting are more heterogeneous then the benefit to the firm from sharing lead time information increases. Our conclusion is that management should only authorize sharing detailed lead time information, be it through information system integration or frontline sales people, after a careful analysis of a customer's sensitivity to delay.     

The value of information used in inventory control of a make-to-order inventory-production system

This paper studies a make-to-order inventory-production system consisting of a warehouse and a workshop. The concept of information level as the detail available on the number of unfilled demands at the workshop is introduced. The focal point is the value of the information used in inventory control in the warehouse. Dynamic programming is used to develop an algorithm for computing the optimal replenishment policy and the average total inventory cost per product. Numerical analysis is carried out and the results show that information used in inventory control can reduce the total inventory cost significantly. It is shown that the classical (Q,R) policy may not perform well if information about the number of demands is partially or fully available.     

Throughput and average inventory in discrete balanced assembly systems

We consider an assembly system consisting of two input machines and an assembly machine, with finite buffers between each input machine and the assembly machine, where all machines operate at deterministic and equal rates, and input machines are subject to random failures. Under the assumption that probabilities of failure and repair are constant during each cycle time (i.e., failure times and repair times are geometric random variables), we derive the steady-state average throughput and inventories for the system.     

Stockout propagation and amplification in supply chain inventory systems

We investigate the existence and magnitude of stockout propagation and stockout amplification in the context of supply chain inventory systems. Stockout amplification is a stage-to-stage increase in overall stockout rates. Stockout propagation is the tendency for stockout at one node to instigate a stockout at a neighbouring node and is conceptually related to the idea of cascading failures in physical systems, such as electrical power grids. We study these concepts in both upstream (‘supply side’) and downstream (‘demand side’) directions in the context of normal operating conditions for an adaptive R, S (periodic, order-up-to) inventory policy. We build a simulation model of a 5-stage serial supply chain that experiences normally distributed customer demands and gamma distributed lead times. We find that stockout propagation exists, but contrary to conventional wisdom, it occurs in the upstream direction. There is little indication that stockout propagation is occurring to any significant degree in the downstream direction. We also find stockout amplification occurring in the upstream direction in scenarios where more aggressively adaptive inventory parameter updating is performed. We discuss implications of this work in the areas of supply chain inventory modelling, ordering decisions, safety stock determination, and the use of adaptive inventory policies.     

Economic analysis of inventory systems: a reply

A shop floor control system (SFCS) consisting of three hierarchical control levels (shop, workstation, and equipment) is described. Each controller plans, schedules, and executes the activities necessary to process an order. An intelligent workstation controller (IWC), which is a part of the SFCS, is described in detail. The 1WC receives information such as part type and quantity, part routeing specifications, and process plans from the shop level controller and coordinates production activities. The IWC performs three main functions—planning, scheduling, and execution in real-time in order to ensure completion of jobs assigned by the shop controller. The focus of this paper is to develop a robust adaptive scheduler to support the IWC which fits within the functional SFCS architecture. The objectives of this paper are: (1) to develop a neural network model that generates several part dispatching strategies based on workstation status; (2) to develop a mutti-pass simulator that evaluates the generated strategies and selects the best strategy to maximize system efficiency; and (3) to compare the efficiency of the scheduling function with other single-pass strategies with respect to several performance criteria.     

Efficient heuristics for two-echelon spare parts inventory systems with an aggregate mean waiting time constraint per local warehouse

This paper presents solution procedures for determining close- to-optimal base stock policies in a multi-item two-echelon spare parts inventory system. The system consists of a central warehouse and multiple local warehouses, and there is a target for the aggregate mean waiting time per local warehouse. We develop four different heuristics and derive a lower bound on the optimal total cost. The effectiveness of each heuristic is assessed by the relative gap between the heuristic’s total cost and the lower bound. The results of the computational experiments show that a greedy procedure performs most satisfactorily. It is accurate as indicated by relatively small gaps, easy to implement, and the computational requirements are limited. Its computational efficiency can be increased by using Graves’ approximate evaluation method instead of an exact evaluation method, while the results remain accurate. That results in a feasible algorithm for real-life cases with many items and local warehouses.