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Impact of inventory inaccuracy on service-level quality in (Q,R) continuous-review lost-sales inventory models

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  • Thiel, Daniel
  • Hovelaque, Vincent
  • Thi Le Hoa, Vo

Abstract

This article focus on the behavior of a (Q,R) continuous-review lost-sales inventory model exposed to an inventory record inaccuracy (IRI). An unusual phenomenon has been observed which runs counter to certain empirical practices in the SMEs based on the principle that safety stock is only necessary for certain intervals in the data inaccuracy rate. Both analytical results and simulation modeling are proposed to investigate the relationship between the quality of service, safety stock and inventory inaccuracy under demand variations. It is shown that the service-level quality is a non-monotone function of the inaccuracy rate, i.e., the service-level quality increases up to an IRI level and subsequently decreases. Other inaccuracy distribution functions have produced the same phenomena with constant demand as well as with demand fluctuations. Finally, another noteworthy result also shows the same phenomenon between the function involving a level of safety stock defined by simulation and the function between the service-level quality and IRI. These different observed results are discussed in terms of both their contribution to the (Q,R) inventory management policies in SMEs and of the limitations to this study.

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  • Thiel, Daniel & Hovelaque, Vincent & Thi Le Hoa, Vo, 2010. "Impact of inventory inaccuracy on service-level quality in (Q,R) continuous-review lost-sales inventory models," International Journal of Production Economics, Elsevier, vol. 123(2), pages 301-311, February.
    • Handle: RePEc:eee:proeco:v:123:y:2010:i:2:p:301-311
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    Cited by:

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    3. Feng Tao & Yanhong Xie & Yao-Yu Wang & Fujun Lai & Kin Keung Lai, 2022. "Contract strategies in competitive supply chains subject to inventory inaccuracy," Annals of Operations Research, Springer, vol. 309(2), pages 641-661, February.
    4. Mendes, Paulo & Leal, José Eugênio & Thomé, Antônio Márcio Tavares, 2016. "A maturity model for demand-driven supply chains in the consumer product goods industry," International Journal of Production Economics, Elsevier, vol. 179(C), pages 153-165.
    5. Kumar, Anupam & Evers, Philip T., 2015. "Setting safety stock based on imprecise records," International Journal of Production Economics, Elsevier, vol. 169(C), pages 68-75.
    6. Agrawal, Paras M. & Sharda, Ramesh, 2012. "Impact of frequency of alignment of physical and information system inventories on out of stocks: A simulation study," International Journal of Production Economics, Elsevier, vol. 136(1), pages 45-55.
    7. Cannella, Salvatore & Framinan, Jose M. & Bruccoleri, Manfredi & Barbosa-Póvoa, Ana Paula & Relvas, Susana, 2015. "The effect of Inventory Record Inaccuracy in Information Exchange Supply Chains," European Journal of Operational Research, Elsevier, vol. 243(1), pages 120-129.
    8. Zhang, Cuihua & Xing, Peng, 2015. "A research on service quality decision-making of Chinese communications industry based on quantum game," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 432(C), pages 9-15.
    9. Feng Tao & Tijun Fan & Kin Keung Lai & Lin Li, 2017. "Impact of RFID technology on inventory control policy," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 68(2), pages 207-220, February.
    10. Hariga, Moncer A., 2010. "A single-item continuous review inventory problem with space restriction," International Journal of Production Economics, Elsevier, vol. 128(1), pages 153-158, November.
    11. Cannella, Salvatore & Dominguez, Roberto & Framinan, Jose M., 2017. "Inventory record inaccuracy – The impact of structural complexity and lead time variability," Omega, Elsevier, vol. 68(C), pages 123-138.
    12. Wang, Fuqiang & Fang, Xiaoping & Chen, Xiaohong & Li, Xihua, 2016. "Impact of inventory inaccuracies on products with inventory-dependent demand," International Journal of Production Economics, Elsevier, vol. 177(C), pages 118-130.

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