Inventory management is considered to be an important field in Supply Chain Management because the cost of inventories in a supply chain accounts for about 30 percent of the value of the product. The service provided to the customer eventually gets enhanced once the efficient and effective management of inventory is carried out all through the supply chain. The precise estimation of optimal inventory is essential since shortage of inventory yields to lost sales, while excess of inventory may result in pointless storage costs. Thus the determination of the inventory to be held at various levels in a supply chain becomes inevitable so as to ensure minimal cost for the supply chain. The minimization of the total supply chain cost can only be achieved when optimization of the base stock level is carried out at each member of the supply chain. This paper deals with the problem of determination of base stock levels in a ten member serial supply chain with multiple products produced by factories using Uniform Crossover Genetic Algorithms. The complexity of the problem increases when more distribution centers and agents and multiple products were involved. These considerations leading to very complex inventory management process has been resolved in this work.
Supply Chain Management (SCM) is an efficient management of the complete end to end process, starting from the design of the product or service to the time when it has been sold, consumed and finally gotten rid of by the consumer. This complete process includes product design, procurement, planning and forecasting, production, distribution, fulfillment and after sales supports. A company's competitiveness in the global economy can be increased only with the aid of effective SCM. This involves complex strategic, tactical and operational decisions that often require an in-depth understanding of industry-specific issues, which ranges from network design to production sourcing and from production planning and inventory management to scheduling [1].
The inventory management problem is one of maintaining an adequate supply of some item to meet an expected pattern of demand, while striking a reasonable balance between the cost of holding the items in inventory and the penalty (loss of sales and goodwill, say) of running out. The item may be a commodity sold by a store; it may be spare machine parts in a factory; it may be railway wagons; it may be cash in the bank to meet the customers’ demand. It is indeed surprising to find that a very wide variety of seemingly different problems can be mathematically formulated as an inventory-control problem. There are, of course, several different models of inventory systems. There are three types of expenses associated with inventory systems. The relative importance of these will depend on the specific system. They are: (i) administrative cost of placing an order, called reorder cost or set cost; (ii) cost of maintaining an inventory, called inventory holding cost a carrying cost, which includes storage charge, interest, insurance, etc., a (iii) shortage cost is a loss of profit, goodwill, etc., when run out of stock. All the above should be optimized for efficient supply chain management.
It has been stated by several people that the focus point of supply chain management is inventories and inventory control. To transfer their focus from scheming logistical costs to investigate supply chains [2] few food manufacturers and grocers formed Efficient Consumer Response in the year 1992. The major competitive factor for companies focused on value creation for end consumers is the customer service. In general, firms hold inventory for two major reasons, to lessen costs and to improve customer service. The inspiration for each varies as firms stabilize the problem of having too much inventory (which can direct to high costs) versus having very small inventory (which can direct to lost sales) [3].
Supply chain management leads to cost savings, mainly in the course of lessening in inventory. Inventory costs have got reduced by about 60% from 1982, whereas transportation costs have fallen by 20% [4]. These cost savings have led many people to follow inventory-reduction strategies in the supply chain. To deal with inventory, firms make use of one of three common approaches. First of all, the majority of retailers make use of an inventory control approach, monitoring inventory levels by item. The second thing is, manufacturers are typically more concerned with production scheduling and use flow management to deal with inventories.
Third, numerous firms (for the majority part those handling raw materials or in extractive industries) do not keenly deal with inventory [5].
The inventory management is influenced by the nature of demand, depending on whether demand is derived or independent. Independent demand comes up from demand for an end product. End products are found all through the supply chain. By definition, a self-governing demand is uncertain, meaning that extra units or safety stock must be accepted to guard against stock outs. While managing uncertainty, the objective should be to minimize the inventory levels and also meet customer expectation. Supply chain coordination can reduce the ambiguity of intermediate product demand, in that way reducing inventory costs [3,6].
Since Ford Harris’ renowned Economic Order Quantity (EOQ) model was first proposed in 1913, the inventory control has been rewarded immense awareness for a long time because of its significance in the cost control. To lessen the total expected inventory costs per unit time while satisfying the customer demand on time [7] is one of the major objectives. Inventory control for large-scale supply chains is well recognized [8][9][10] as an essential problem with several applications together with manufacturing systems, logistics systems, communication networks, and transportation systems [11]. It is essential to locate the apt mechanism for coordinating the inventory processes that are controlled by independent partners, in order to find out the right ordering quantity and inventory level amid partners in the chain. For example, the manufacturer make use of the periodic review and lot sizing policy to manage its
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