The Impact of Integrated Analysis on Supply Chain Management

Topics: Inventory, Supply chain management, Supply chain Pages: 33 (9676 words) Published: November 17, 2010
Research paper

The impact of integrated analysis on supply chain management: a coordinated approach for inventory control policy G. Reza Nasiri, Hamid Davoudpour and Behrooz Karimi
Department of Industrial Engineering, Amirkabir University of Technology, Tehran, Iran Abstract Purpose – Effective inventory management is very critical to market success. The purpose of this paper is to formulate an integrated model for the location of warehouse, the allocation of retailers to the opened warehouses, and finding the perfect policy for inventory control to managing order quantity and safety stock level. The goal is to select the optimum numbers, locations, capacities of the opening warehouses and inventory policy so that all stochastic customer demands can be satisfied. Design/methodology/approach – It is assumed that the location of plant has already been determined and the paper answers the following questions: what are the location decisions over the planning horizon? How retailers are allocated to the warehouses? What are the optimum capacities for the opened warehouses? What is the best inventory policy for this supply chain? What are the total minimum costs? Findings – The model was developed as a non-linear mixed integer programming and solved using Lagrange relaxation and sub-gradient search for the location/allocation module and a procedure for the capacity planning module. The results for the randomly selected problems show that the average duality gap ranges are between 0.51 and 1.58 percent. Also, from the CPU time point of view, the performance of the proposed algorithm was very good. Originality/value – The paper addresses an integrated location, allocation, and inventory decisions in the design of a supply chain distribution network. In addition sensitivity analyses are conducted to evaluate the effects of the multi-capacity levels on some performance measures. Keywords Supply chain management, Distribution and inventory management, Inventory control Paper type Research paper

1. Introduction
The distribution planning decision (DPD) is one of the most comprehensive strategic decision issues that needs to be optimized for the long-term efficient operation of the whole supply chain (SC). The DPD involves optimizing the transportation plan for allocating goods and/or services from a set of sources to various destinations in a supply chain (Liang, 2006). An important strategic issue related to the design and operation of a physical distribution network in a supply chain system is the determination of the best sites for intermediate stocking points, or warehouses. The use of warehouses provides a company with flexibility to respond to changes in the marketplace and can result in significant cost savings due to the economies of scale in transportation or shipping costs. In a supply-chain, a number of organizations cooperate with each other in order to improve the competitive capabilities of the whole chain. Among the typical processes The current issue and full text archive of this journal is available at

Supply Chain Management: An International Journal 15/4 (2010) 277– 289 q Emerald Group Publishing Limited [ISSN 1359-8546] [DOI 10.1108/13598541011054652]

of a supply chain, distribution corresponds to the flow of materials and goods between an organization and its suppliers or customers. Designing distribution networks has attracted the attention of many researchers during recent years. Satisfying the customers’ demands on time is very important, for being cost-effective, and for its role in increasing the service level of customers. The purpose of this paper is to design an integrated distribution center location, allocation and inventory decisions for multi-commodity supply chains in a stochastic environment. The paper has two important applied and theoretical contributions. First, it presents a new comprehensive and practical, but tractable, optimization model for...
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