Inventory Policy for Improved Supply Chain Performance Under Constrained Supply

Abstract

This paper proposes and evaluates an inventory policy of position-based type to enhance the supply chain performance under supplier capacity constraints. The proposed policy has been assessed, for different demand scenarios, by the fill rate, bullwhip effect, and total cost of the supply chain. For all scenarios, the supply chain performance of the proposed policy has been compared with the performance of other known inventory policies, such as Order-Up-To, (s, S), and (s, Q) using modeling and simulation methodology. The results show performance improvements using the proposed policy compared to the other policies. It provides a guide line for industrial managers, facing supplier capacity constraints, to select the best inventory policy under different operating conditions in a supply chain.