Matching your orders to the needs and economies of your supply chain

Proceedings of the 7th EurOMA Conference, Ghent, Belgium, June 4th-7th. In ‘Operations Management-Crossing borders and boundaries: The changing role of operations’, edited by Van Dierdonck, R. and Vereecke, A., 181-174.

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Abstract

Two extreme ordering systems are represented by level scheduling and order-up-to policies. They both incur significant costs: in level scheduling they are mainly due to higher inventory holding costs and in order-up-to scenarios, additional costs result from the need to rapidly ramp production both up and down. Moreover, order-up-to policies are known to create variance amplification or Bullwhip Effect. In this paper, we present a generic replenishment rule against the background of total cost minimisation (inventory holding and production switching costs), that succeeds in creating smooth production order patterns according to a pre-specified level of responsiveness.