The impact of inventory holding costs on the strategic design of supply chains
The explicit consideration of inventory holding costs for the strategic design of supply chains has not been sufficiently addressed in scientific literature. A possible cause is that usually supply chain optimization models are deterministic and linear or mixed-integer linear, while forecasting met...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
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Universidad de Antioquia
2020-06-01
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| Series: | Revista Facultad de Ingeniería Universidad de Antioquia |
| Subjects: | |
| Online Access: | https://revistas.udea.edu.co/index.php/ingenieria/article/view/341403 |
| _version_ | 1797861822972297216 |
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| author | Liliana Bolaños-Zúñiga Carlos Julio Vidal-Holguin |
| author_facet | Liliana Bolaños-Zúñiga Carlos Julio Vidal-Holguin |
| author_sort | Liliana Bolaños-Zúñiga |
| collection | DOAJ |
| description |
The explicit consideration of inventory holding costs for the strategic design of supply chains has not been sufficiently addressed in scientific literature. 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. It is clear, however, that inventory costs might have a significant impact on optimal supply chain configuration and on distribution systems expansion or contraction. 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. 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. 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.
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| first_indexed | 2024-04-09T22:09:27Z |
| format | Article |
| id | doaj.art-6033e55016524bd1920dab71954626c4 |
| institution | Directory Open Access Journal |
| issn | 0120-6230 2422-2844 |
| language | English |
| last_indexed | 2024-04-09T22:09:27Z |
| publishDate | 2020-06-01 |
| publisher | Universidad de Antioquia |
| record_format | Article |
| series | Revista Facultad de Ingeniería Universidad de Antioquia |
| spelling | doaj.art-6033e55016524bd1920dab71954626c42023-03-23T12:28:15ZengUniversidad de AntioquiaRevista Facultad de Ingeniería Universidad de Antioquia0120-62302422-28442020-06-0110110.17533/udea.redin.20200692The impact of inventory holding costs on the strategic design of supply chainsLiliana Bolaños-Zúñiga0Carlos Julio Vidal-Holguin1Governorate of Meta University of Valle The explicit consideration of inventory holding costs for the strategic design of supply chains has not been sufficiently addressed in scientific literature. 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. It is clear, however, that inventory costs might have a significant impact on optimal supply chain configuration and on distribution systems expansion or contraction. 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. 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. 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. https://revistas.udea.edu.co/index.php/ingenieria/article/view/341403network analysisinventoriesoptimizationsimulation models |
| spellingShingle | Liliana Bolaños-Zúñiga Carlos Julio Vidal-Holguin The impact of inventory holding costs on the strategic design of supply chains Revista Facultad de Ingeniería Universidad de Antioquia network analysis inventories optimization simulation models |
| title | The impact of inventory holding costs on the strategic design of supply chains |
| title_full | The impact of inventory holding costs on the strategic design of supply chains |
| title_fullStr | The impact of inventory holding costs on the strategic design of supply chains |
| title_full_unstemmed | The impact of inventory holding costs on the strategic design of supply chains |
| title_short | The impact of inventory holding costs on the strategic design of supply chains |
| title_sort | impact of inventory holding costs on the strategic design of supply chains |
| topic | network analysis inventories optimization simulation models |
| url | https://revistas.udea.edu.co/index.php/ingenieria/article/view/341403 |
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