Impact of three delays on the inaccuracy and policy interventions in inventory system with instantaneous order fulfillment
Date of Publication
Master of Science in Industrial Engineering
Gokongwei College of Engineering
An estimated amount of $1.23 trillion a year are spent for management of inventory alone where inaccuracies are one of prevalent issues consistently being tackled. These inaccuracies jeopardize the financial performance of companies through lost sales, delay penalties, inoperability of operations, and additional costs associated with use of inaccurate information like redelivery or recount. Several solutions had been introduced from prevention, correction, up to integration of policies to halt the detrimental effect of these inaccuracies in causing overlapping stock-outs and excess inventory that balloons the expense of retail sectors. However, these solutions focus on using technology and controlling the physical inventory to address the issue but inaccuracy prevails bringing severe consequences to inventory management systems with faster lead time and turnover of goods. This study measured the impact of three delays in material, information and decision making processes to determine how the common replenishment, inaccuracy correction, information system infrastructure, and technology integration policies could reduce the magnitude of inventory inaccuracy and the time effort required to maintain accuracy all through-out the period. The impact of delay was evaluated under the most critical impact of inaccuracy on inventory systems through discrete-event simulation of a retail chain. A simulation approach is conducted to handle the internal complexities brought by the material and information flow, multi-location, high number of transactions, and depiction of time delay. A retail chain that operates in three distinct locations namely the receiving area, the storage area, and the shelf is analyzed. Findings show that the initial noted effects of inaccuracy of increasing stock-outs and excess inventory does not happen when inherent delay is present. The lengths of delays in material, information, and decision-making have different impacts to inaccuracy, stock-outs, and excess inventory behavior. Furthermore, presence of bottlenecks in material process decrease excess inventory and increase magnitude of inaccuracy and number of stock-outs. Information flow bottleneck increases the magnitude of inaccuracy if it occurred at the start of the process, but has no effect on the number of stock-outs or excess inventory. The sequence of physical inventory flow and information capture decreases the magnitude of inaccuracy and the number of stock-outs. Using Auto-ID technologies has no impact to the performance of the system when inventory inaccuracy is present but when the information in accurate it can reduce the number of stock-outs through time. The implementation of (S,s) review policy in the presence of delay worsen the performance of the system in terms of prolonging the length of stock-out occurrence depending on the number of safety stocks ordered but this is compensated by the number of customer demands fulfilled in a given period . Improvement in one of the components of delay in the presence of errors would only make the system worse. In the presence of delay, the occurrence of inaccuracy is expected thereby indicating that inaccuracy is inherent in the system. Inaccuracy is not indicative of a bad system performance but rather it is indicative of what is happening in the system. Overall, improvements in all kinds of processing time is not the answer, it is knowledge of the intrinsic details of processing times that shows to be more useful.
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Brillante, J. (2011). Impact of three delays on the inaccuracy and policy interventions in inventory system with instantaneous order fulfillment. Retrieved from https://animorepository.dlsu.edu.ph/etd_masteral/4080