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Square root law of inventory
Square root law of inventory









square root law of inventory square root law of inventory square root law of inventory

Since these rules are normally applied on an item-by-item basis and a company may be holding hundreds or thousands of items at each location, in practical applications, the problem might be cumbersome. As stated in, the problem is that the impact of the consolidation or expansion of supply chain inventory locations on overall supply chain inventory depends on the specific inventory control rules applied at each location. Examples of these modeling strategies can be found even in recent works such as.ĭetermining how inventory levels fluctuate when a supply chain expands or contracts is not straightforward. For example, an inventory policy may be to hold, at the end of each time period, a specified percentage of the expected demand of the next time period. It is common to find multi-period supply chain optimization models that consider inventory decision variables in balance constraints with or without specified inventory policies, such as prior setting of safety inventory. Second, optimization models for supply chain design are mostly linear or mixed-integer linear whereas demand forecasting and inventory control models are almost always non-linear. First, supply chain optimization models are often deterministic while demand forecasting methods and inventory control models are stochastic. The supply chain inventory problem is twofold. Several works that deal with network design do not consider inventory holding costs for decision making. Network optimization models frequently exclude inventory decisions and costs. The effect of inventory costs on the strategic design of supply chains has not been fully studied. Palabras claves: Red de abastecimiento inventarios optimización modelos de simulación Los resultados sugieren que la SRL no debería utilizarse a menos que se cumplan supuestos inusuales y que las funciones potenciales son una muy buena aproximación para considerar costos de inventarios en la configuración de cadenas de abastecimiento. Tres estrategias para incluir los costos de inventario en la función objetivo del modelo fueron analizadas: La Regla de la Raíz Cuadrada (SRL), las funciones potenciales que relacionan el inventario promedio con el flujo en una bodega y la estimación de inventarios promedio por simulación. En este artículo se presenta una estrategia práctica que considera el sistema de control de inventarios a nivel de ítem a través de un modelo de simulación Monte Carlo como punto de partida para incluir los costos de mantenimiento del inventario en un modelo de optimización de la cadena. Es claro, sin embargo, que los costos de inventario pueden tener un impacto significativo en la configuración óptima de la cadena y en situaciones de expansión o contracción de sistemas de distribución. Una posible causa es que usualmente los modelos de optimización de cadenas de abastecimiento son determinísticos y lineales o enteros-mixtos lineales, mientras que los modelos de pronósticos y sistemas de control de inventarios son estocásticos y no-lineales. La consideración explícita de los costos de mantenimiento del inventario para el diseño estratégico de cadenas de abastecimiento no ha sido suficientemente abordada en la literatura científica. Keywords: Network analysis inventories optimization simulation models The results suggest that the SRL should not be used unless unusual assumptions hold and that potential functions are a very good approximation to consider inventory costs for supply chain configuration. Three strategies to include inventory costs in the objective function were analyzed: The Square Root Law (SRL), the potential functions that relate average inventory with warehouse throughput, and the estimation of average inventories by simulation. This article presents a practical strategy that considers an item-by-item inventory control system by means of a Monte Carlo simulation model as a starting point to include inventory holding costs in a supply chain optimization model.

square root law of inventory

It is clear, however, that inventory costs might have a significant impact on optimal supply chain configuration and on distribution systems expansion or contraction. A possible cause is that usually supply chain optimization models are deterministic and linear or mixed-integer linear, while forecasting methods and inventory control systems are stochastic and non-linear. The explicit consideration of inventory holding costs for the strategic design of supply chains has not been sufficiently addressed in scientific literature.











Square root law of inventory