A proposal for inventory adjustment using "multiple-layers SEC-CIS model"

What constitutes a desirable inventory level in supply chain management (SCM) depends on the business model. While the level is being maintained, unexpected situations sometimes occur. The organization that manages the level must focus on adjusting the level to protect against such risks. The "multiple-layers SEC-CIS model" is useful as a framework to promote such a focus by enhancing understanding of the mechanism by which opinions of related players can be adjusted. Therefore, this study proposes that the "multiple-layers SEC-CIS model" is useful for inventory adjustment. A desirable inventory level in a given business model corresponds to "a plan", and maintaining that inventory level corresponds to "the execution". At the stage of execution, the inventory level will be adjusted according to changes in quantity, quality, price or the date that the materials are procured or the products are ordered. If such changes fluctuate within the assumptions of the model, the inventory control system can cope with them based on the mathematical model. However, inventory adjustment based on the mathematical model is difficult when unexpected rapid change occurs. The framework is necessary for organizations to analyze existing information and new conditions, and to make decisions on how to cope with such risk. For those purposes, we have proposed the "multiple-layers SEC-CIS model", which explains how knowledge value is cultivated based on communication between organizations. Prior to our model, the "SECI model" was proposed by Nonaka and Takeuchi [1995. The Knowledge-Creating Company. Oxford University Press, Oxford]. They regarded knowledge creation in an organization as a process of change from tacit knowledge to explicit knowledge. They described the four modes of knowledge creation: "S" (socialization), "E" (externalization), "C" (combination) and "I" (internalization). The well-known "SECI model" is named after this process. We got suggestions from the "SECI model" to develop our model: each organization goes through the cycle of "C-I-S-E-C", the cycle of "interpretation-thinking-transmission". In other words, information obtained from outside the organization is interpreted and becomes the basis of the next behavior. When two or more organizations share each mode, namely "S", "E", "C" and "I", knowledge can be shared between those organizations. Particularly, the knowledge which is most likely to be shared is explicit knowledge (information). We based our analysis on the assumption that the knowledge that can be gained from outside of the organization (player/layer) is always explicit knowledge, and that which can be introduced to other organization (player/layer) is only explicit knowledge. We then developed "SEC-CIS model", and explicit knowledge (information) were connected with another organization (layer) at the mode "C". Thus we have reached "multiple-layers SEC-CIS model", which were expressed three-dimensionally. Using a case, we illustrate the usefulness of the "multiple-layers SEC-CIS model" to describe communications between layers about inventory-level setting.