A Computational Model for Determining Levels of Factors in Inventory Management Using Response Surface Methodology

Chia-Nan Wang, Thanh-Tuan Dang and Ngoc-Ai-Thy Nguyen
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Chia-Nan Wang: Department of Industrial Engineering and Management, National Kaohsiung University of Science and Technology, Kaohsiung 80778, Taiwan
Thanh-Tuan Dang: Department of Industrial Engineering and Management, National Kaohsiung University of Science and Technology, Kaohsiung 80778, Taiwan
Ngoc-Ai-Thy Nguyen: School of Manufacturing Systems and Mechanical Engineering, Sirindhorn International Institute of Technology, Thammasat University, Pathum Thani 12121, Thailand

Mathematics, 2020, vol. 8, issue 8, 1-23

Abstract: Inventory management plays a critical role in balancing supply availability with customer requirements and significantly contributes to the performance of the whole supply chain. It involves many different features, such as controlling and managing purchases from suppliers to consumers, keeping safety stock, examining the amount of product for sale, and order fulfillment. This paper involves the development of computational modeling for the inventory control problem in Thailand. The problem focuses on determining levels of factors, which are order quantity, reorder point, target stock, and inventory review policy, using a heuristic approach. The objective is to determine the best levels of factors that are significantly affected by their responses to optimize them using the response surface methodology. Values of the quantity of backlog and the average inventory amount, as well as their corresponding total costs, are simulated using the Arena software to gain statistical power. Then, the Minitab-response surface methodology is used to find the feasible solutions of the responses, which consist of test power and sample size, full factorial design, and Box–Behnken design. For a numerical example, the computational model is tested with real data to show the efficacy of the model. The result suggests that the effects from the reorder point, target stock, and inventory review policy are significant to the minimum total cost if their levels are set appropriately. The managerial implications of this model’s results not only suggest the best levels of factors for a case study of the leading air compressor manufacturers in Thailand, but also provide a guideline for decision-makers to satisfy customer demand at the minimum possible total inventory cost. Therefore, this paper can be a useful reference for warehouse supervisors, managers, and policymakers to determine the best levels of factors to improve warehouse performance.

Keywords: inventory; design of experiment; response surface methodology; full factorial design; Box–Behnken design; levels of factors; cost optimization (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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