Design of a novel adaptive inventory control system based on the online identification of lead time

In this paper, an adaptation method for the online identification of lead time is incorporated in production–inventory control systems. Based on the lead time estimate, the tuning parameters are updated in real time to improve the efficiency of the system. Combination of the adaptive scheme with a proportional control law is able to eliminate the inventory drift that appears when the actual lead time is not known in advance or when it varies with time. A detailed analysis is provided for the proposed production–inventory system, including a stability analysis and the quantification of its bullwhip effect. Several examples and comparison with state-of-the-art alternative approaches illustrate the efficiency of the system.     

Inventory control with a modified Croston procedure and Erlang distribution

This paper considers an inventory control system, primarily for a finished goods inventory. The purpose is to create a procedure that can handle both fast-moving items with regular demand and slow-moving items. The suggested procedure should be easy to implement in a modern computerized ERP-system. Essentially, the system is a periodic review system built around a Croston forecasting procedure. An Erlang distribution is fitted to the observed data using the mean and variance of the forecasted demand rate. According to probabilities for stock shortages, derived from the probability distribution, the system decides if it is time to place a new order or not. The Croston forecasting method is theoretically more accurate than ordinary exponential smoothing for slow-moving items. However, it is not evident that a Croston forecasting procedure (with assumed Erlang distribution) outperforms ordinary exponential smoothing (with assumed normal distribution) applied in a “practical” inventory control system with varying demand, automatically generated replenishment, etc. Our simulation study shows that the system in focus will present fewer shortages at lower inventory levels than a system based on exponential smoothing and the normal distribution.     

Gibrat's Law: Are the Services Different?

Several noted surveys on intra-industry dynamics have reached the conclusion from a large body of evidence that Gibrat's Law does not hold. However, almost all of these studies have been based on manufacturing or large scale services such as banking and insurance industries. There are compelling reasons to doubt whether these findings hold for small scale services such as the hospitality industries. In this paper we examine whether the basic tenet underlying Gibrat's Law– that growth rates are independent of firm size – can be rejected for the services as it has been for manufacturing. Based on a large sample of Dutch firms in the hospitality industries the evidence suggests that in most cases growth rates are independent of firm size. Validation of Gibrat's Law in some sub-sectors of the small scale services suggests that the dynamics of industrial organization for services may not simply mirror that for manufacturing. The present paper includes a survey of nearly 60 empirical studies on firm growth rates.     

Optimal inventory control of empty containers in inland transportation system

In this paper, we deal with an inventory control problem of empty containers in an inland transportation system. In inland container transportation, freights (containers) are transported between terminal and the customer’s location by trucks, trains and barges. Empty containers are an important logistic resource and shipping companies try to operate and manage empty containers efficiently. Because of the trade imbalance between hub ports, empty containers should be periodically repositioned from surplus areas to shortage areas. However, it is not easy to exactly forecast the demand of empty containers, and we therefore need to build an efficient way to reposition the empty containers. In this paper, we consider a shortage area and propose an efficient inventory policy to control empty containers. We assume that demands per unit time are independent and identically distributed random variables. To satisfy the demand of empty containers, we reposition empty containers from other hubs based on the (s, S) inventory policy, and also consider the lease of empty containers with zero lead time. For the leased containers, we should return the number of empty containers leased to the leaser after the specified period. For a given policy, simulation is used to estimate the expected cost rate and we use the optimization tool, OptQuest^® in Arena to obtain the near optimal (s, S) policy in numerical examples.     

A robustness study of a multi-echelon inventory model via simulation

This paper examines the robustness of a standard model of multi-echelon inventory systems, specifically the models discussed in Axsäter (Oper. Res. 48(5) (2000) 686). A simulation model was developed to explore the model's ability to predict system performance for a two-echelon one-warehouse, multiple retailer system using (R,Q) inventory policies under conditions that violate the model's fundamental modeling assumptions. In particular, the impact of non-stationary demand on this stationary demand inventory model was examined. The model performs well at the low demand and large retailer order batch size situations, but our testing of the model indicated that care must be taken when applying this model to situations that violate its fundamental assumption. These results should help practitioners to better understand the assumptions of these models and to determine when or when not to apply these models in practice.     

Variance amplification and the golden ratio in production and inventory control

A discrete linear control theory model of a generic model of a replenishment rule is presented. The replenishment rule, which we term a “Deziel Eilon—automatic pipeline, inventory and order-based production control system”, is guaranteed to be stable. From a z-transform model of the policy, an analytical expression for bullwhip is derived that is directly equivalent to the common statistical measure often used in simulation, statistical and empirical studies to quantify the bullwhip effect. This analytical expression clearly shows that we can reduce bullwhip by taking a fraction of the error between the target and actual inventory and pipeline (or work in progress (WIP) or “orders placed but not yet received”) positions. This is in contrast to the common situation where ordering policies account for all of the error every time an order is placed. Furthermore, increasing the average age of the forecast reduces bullwhip, as does reducing the production/distribution lead-time. We then derive an analytical expression for inventory variance using the same procedure to identify the closed form bullwhip expression.We assume that a suitable objective function is linearly related to the bullwhip and inventory variance amplification ratios and then optimise the PIC system for different weightings of order rate and inventory level variance. We highlight two forms of the objective function, one where “the golden ratio” can be used to determine the optimal gain in the inventory and WIP feedback loop and another that allows the complete range of possible solutions to be visualised. It is interesting that the golden ratio, which commonly describes the optimum behaviour in the natural world, also describes the optimal feedback gain in a production and inventory control system.     

Evaluating the robustness of lead time demand models

This paper examines the robustness of lead time demand models for the continuous review (r, Q) inventory policy. A number of classic distributions, (e.g. normal, lognormal, gamma, Poisson and negative binomial) as well as distribution selection rules are examined under a wide variety of demand conditions. First, the models are compared to each other by assuming a known demand process and evaluating the errors associated with using a different model. Then, the models are examined using a large sample of simulated demand conditions. Approximation results of inventory performance measures—ready rate, expected number of backorders and on-hand inventory levels are reported. Results indicate that distribution selection rules have great potential for modeling the lead time demand.     

Determination of an order-up-to policy in the stochastic economic lot scheduling model

We consider a production–inventory problem with compound renewal item demand. The model consists of stockpoints, one for each item, controlled according to (R,S)-policies and one machine which replenishes them. The replenishment orders are produced with a fixed rate on the machine with significant setup times and costs, which are stochastic and sequence dependent. The time between the release and the production of the replenishment order is called the waiting time. We develop analytical approximations for the first two moments of this waiting time, the order-up-to levels and the average physical inventory levels for all stockpoints, given the target fill rates. These analytical approximations allows for a quick evaluation of the waiting time which is important when optimization of the system is considered.     

On the Intricacies of the Chinese Guanxi: A Process Model of Guanxi Development

Guanxi (personal connection) has been identified as a necessary condition to do business successfully in China. In this paper, we seek a clear conceptual understanding of this prevalent construct and propose a three-stage model of guanxi development so as to stimulate systematic research in this area. Our conceptual and theoretical discussion of guanxi bases,guanxi objectives, and the operating principles at different stages of guanxi development will also help practitioners to use guanxi more effectively.     

Firm Growth Under Sample Selection: Conditional <Emphasis>σ</Emphasis>-Convergence in Firm Size?

This paper tests the second, widely neglected implication of Gibrat’s law stating that the variance of firm size distribution increases over time. In contrast, learning models imply conditional σ-convergence in firm size. A unique data set of Austrian firms especially suited to account for sample selection effects is used to analyze the growth/size nexus of firms. The estimation results suggest that the predicted variance in firm size decreases only for firms of age 30 or below. For older age cohorts the hypothesis of a constant variance either cannot be rejected or increasing variances are found.     

Near-optimal (r,Q) policies for a two-stage serial inventory system with Poisson demand

We consider a two-stage serial inventory system whose cost structure exhibits economies of scale in both stages. In the system, stage 1 faces Poisson demand and replenishes its inventory from stage 2, and the latter stage in turn orders from an outside supplier with unlimited stock. Each shipment, either to stage 2 or to stage 1, incurs a fixed setup cost. We derive important properties for a given echelon-stock (r, Q) policy for an approximation of the problem where all states are continuous. Based on these properties, we design a simple heuristic algorithm that can be used to find a near-optimal (r, Q) policy for the original problem. Numerical examples are given to demonstrate the effectiveness of the algorithm.     

A binary solution method for the multi-product newsboy problem with budget constraint

Multi-product newsboy problem (MPNP) with budget constraint is a classical inventory control/management problem. However, solution methods for MPNP under general demand distributions are limited in the current literature. In this paper, by analyzing properties of the optimal solution to the MPNP with a budget constraint, we develop a solution algorithm for the constrained MPNP. The proposed algorithm is binary in nature, and is applicable to general types of demand distribution functions, discrete as well as continuous. For continuous demand distribution function, our approach can obtain the optimal or near optimal solution to the constrained MPNP with polynomial computation complexity of the o(n) order. On the other hand, for discrete demand distribution functions, it can effectively provide good approximate solution. Numerical experiments are presented to show the performance of our method.     

A serial mixed produce-to-order and produce-in-advance inventory model with multiple retailers

We formulate a general mixed produce-to-order and produce-in-advance inventory model having multiple stocking echelons and multiple retailers. We show that the problem to find an optimal inventory policy for such a model with a uniform or a normal demand distribution can be reduced to a general constrained optimization problem.     

An investigation of setup instability in non-stationary stochastic inventory systems

In stochastic inventory systems unfolding uncertainties in demand lead to the revision of earlier replenishment plans which in turn results in an instability or so-called system nervousness. In this paper, we provide the grounds for measuring system nervousness in non-stationary demand environments, and gauge the stability and the cost performances of (R,S) and (s,S) inventory policies. Our results reveal that, both the stability and the cost performance of inventory policies are affected by the demand pattern as well as the cost parameters, and the (R,S) policy has the potential to replace the cost-optimal (s,S) policy for systems with limited flexibility.     

A perishable inventory model with Markovian renewal demands

In the inventory model, people usually assume that the inter-demand time is independently identical distributed which may not be true in reality. Here we study an (s,S) continuous review model for items with an exponential random lifetime and a general Markovian renewal demand process. By constructing Markovian renewal equations, we derive the mean and the variance of the reorder cycle time and lead to a simple expression for the total expected long run cost rate. The numerical results illustrate the system behavior and lead to managerial insights into controlling such inventory systems.     

Quantifying the benefits of breaking bulk in retail operations

We explore the benefits of ‘breaking bulk’ in retail operations. Here, breaking bulk refers to delivering single units from distribution centers to retail outlets rather than the multiple units bundled together by manufacturers termed ‘case-packs’. The focus is largely on the benefits to space management at the retail level, rather than the more obvious reduction in inventory costs. Using data from the grocery industry, results indicate that retail unit profitability can be increased substantially by breaking bulk—but only if current inventory replenishment practices are changed. In essence, breaking bulk allows for either higher product variety within a store or identical variety in smaller stores. This work seeks to quantify the order of magnitude of that benefit.     

Consumer behavior in the Italian mobile telecommunication market

This paper investigates the characteristics of Italian cell phone users. A multidimensional segmentation approach was adopted, using concurrently three sets of variables: consumer/user lifestyles, use motivations and product/service attributes. Data on a national sample (1067 individuals) were collected and factor and cluster analysis were then performed on the database. The study led to the identification of three user segments, each with a diverse combination of the segmentation variables. Findings provide implications for the mobile telecommunication industry and could suggest strategic choices to mobile operators—especially cell phone producers—and constitute the basis for their strategic positioning.     

Impact of personal and cultural factors on knowledge sharing in China

Knowledge sharing has been the focus of research for more than a decade and it is widely recognized that it can contribute to the success of an organisation. However, in comparison with other countries, relatively little work on this topic has been done in the Chinese context. Knowledge sharing is particularly interesting to study in the Chinese context at the individual level, given the unique social and cultural characteristics of this environment. In this paper, we develop a theoretical model to explain how personal factors would affect people’s intention to share their knowledge. The Theory of Reasoned Action and Social Exchange Theory are used in this paper, as are the time dimension of national culture, face, and guanxi. A survey methodology is used to test the model. Face and guanxi orientation both exert a significant effect on the intention to share knowledge. Theoretical and practical implications, as well as directions for future research, are discussed.

Inventory model for an inventory system with time-varying demand rate

The standard inventory problems of the multi-period have been modeled under different situations. Specifically we have considered the demand subjects of a continuous distribution and a discrete distribution, and whether the demand of each period is unchanged or not. A method to get an economic order quantity in inventory systems with discrete and unchanged demand was presented in a previous paper, and this method has been generalized to an inventory model with varying continuous demand. However, it was not achieved due to there being many classified cases in the general situations. In this article the above method is discussed in the case discrete demand to determine whether it increases or decreases from period to period. A theoretical method is presented by using previous results and some examples are given which suggest how the concept can handle on inventory system. In order to make the decision, an algorithm is also presented under some conditions, and examples are shown by using the computer software program, Mathematica, which helps to explain the findings. In general cases, we view the optimal policy in the inventory problems in only a few periods.     

Misuse of the ‘modified’ t statistic in regulatory telecommunications

Since the enactment of the Telecommunications Act of 1996 (1996), extensive expert testimony has justified use of the ‘modified’ t statistic (Brownie et al. Biometrics 46 (1990) 259–266) for performing two-sample hypothesis tests on Bell companies’ CLEC and ILEC performance measurement data. This paper demonstrates how key statistical claims made about the ‘modified’ t in this setting are false, leading not only to incorrect inferences as it currently is being used, but also to the possible undermining of the primary stated objective of the Act—the promotion of competition in the newly deregulated local telephone service markets. A simulation study provides strong evidence for the use of several other easily-implemented statistical procedures in this context; they should be useful in other settings as well.