Analysis of inventory level under procurement constraints in supply chain

Abstract

Because the inventory is one of the major factors that affect the performance of the supply chain system, efficient reduction of an inventory can effectively reduce the cost level of the total supply chain. Therefore, inventory management is an important means to optimize the operation of a supply chain and enhance the competitive advantage. Considering the (s, S) policy in an inventory management, this paper establishes a model of the inventory level. Then, the change of the inventory level with and without the procurement constraints is analyzed, and their expectation and variance calculated. Consequently, the order point can be determined accurately to reduce the inventory level and the operation risk.