Analysis of simple inventory control systems with execution errors: Economic impact under correction opportunities

Esma Gel, Nesim Erkip, Anoop Thulaseedas

Research output: Contribution to journalArticle

9 Scopus citations

Abstract

Motivated by recent empirical evidence, we study the economic impact of inventory record inaccuracies that arise due to execution errors. We model a set of probable events regarding the erroneous registering of sales at each demand arrival. We define correction opportunities that can be used to (at least partially) correct inventory records. We analyze a simple inventory control model with execution errors and correction opportunities, and demonstrate that decisions that consider the existence of recording errors and the mechanisms with which they are corrected can be quite complicated and exhibit complex tradeoffs. To evaluate the economic impact of inventory record inaccuracies, we use a simulation model of a (Q,r) inventory control system and evaluate suboptimalities in cost and customer service that arise as a result of untimely triggering of orders due to inventory record inaccuracies. We show that the economic impact of inventory record inaccuracies can be significant, particularly in systems with small order sizes and low reorder levels.

Original languageEnglish (US)
Pages (from-to)153-166
Number of pages14
JournalInternational Journal of Production Economics
Volume125
Issue number1
DOIs
StatePublished - May 1 2010

Keywords

  • Execution errors
  • Inventory control
  • Inventory record inaccuracies
  • RFID
  • Simulation

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics and Econometrics
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering

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