Models for optimising the volume of material flows in the technological chain of corporate vertically integrated structures of the agricultural sector

Abstract

The relevance of this study lies in the need to optimise supply cycles and volumes in value chains, which helps to reduce costs and increase the profitability of agricultural enterprises. The purpose of this study was to investigate and optimise the costs of initial material flows in the production subsystems of corporate vertically integrated structures of the agricultural complex under conditions of non-stationary demand. To fulfil this purpose, the study investigated the relationship between the amount of raw material stock stored in the production subsystem and the time of its consumption, based on which an extended model of the economic order quantity (EOQ) was considered, which, apart from the defined costs, also considers the costs of raw material shortages associated with the inability to fulfil deliveries and losses associated with supply failures caused by the unpredictability (stochasticity) of the order flow itself. It was found that in continuous production systems there is an opportunity to reduce the costs associated with failures by using an additional regular supply batch. For this, the mathematical “point-of-order” model was built based on the theory of mass service, which allows determining not only the best point to order, but also the optimal amount of the safety stock. A model for optimising the volume of material flows was proposed, which combines the model of the economic order quantity order adapted for use in product subsystems of corporate integrated structures of the agricultural complex and the “point-of-order” model, which allows calculating the minimum size of the insurance stock of raw materials using the tools of operations research. As an example, the material flow was optimised for Kivshovata Agro LLC. The findings of the study, such as the use of analytical tools and models for determining the economic order quantity and safety stock, can be used by the management of agricultural enterprises to improve the efficiency of material flow management