The impact of increasing demand visibility on production and inventory control efficiency

The impact of increasing demand visibility on production and inventory control efficiency Information sharing practices such as vendor‐managed inventory (VMI) give manufacturers access to more accurate demand information, e.g. customer sales data, than before. The value of this type of information sharing has been established in many studies. However, most of the research has focused on the ideal situation of the manufacturer having access to information from all downstream parties. In practice, this is rarely the case. In this paper, discrete‐event simulation is used to examine how a manufacturer can combine traditional order data available from non‐VMI customers with sales data available from VMI customers in its production and inventory control and what impact this has on the manufacturer's operational efficiency. The simulation model is based on a real‐life VMI implementation and uses actual demand and product data. The key finding is that even for products with stable demand a partial improvement of demand visibility can improve production and inventory control efficiency, but that the value of visibility greatly depends on the target products’ replenishment frequencies and the production planning cycle employed by the manufacturer. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Physical Distribution & Logistics Management Emerald Publishing

The impact of increasing demand visibility on production and inventory control efficiency

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Publisher
Emerald Publishing
Copyright
Copyright © 2003 MCB UP Ltd. All rights reserved.
ISSN
0960-0035
DOI
10.1108/09600030310478801
Publisher site
See Article on Publisher Site

Abstract

Information sharing practices such as vendor‐managed inventory (VMI) give manufacturers access to more accurate demand information, e.g. customer sales data, than before. The value of this type of information sharing has been established in many studies. However, most of the research has focused on the ideal situation of the manufacturer having access to information from all downstream parties. In practice, this is rarely the case. In this paper, discrete‐event simulation is used to examine how a manufacturer can combine traditional order data available from non‐VMI customers with sales data available from VMI customers in its production and inventory control and what impact this has on the manufacturer's operational efficiency. The simulation model is based on a real‐life VMI implementation and uses actual demand and product data. The key finding is that even for products with stable demand a partial improvement of demand visibility can improve production and inventory control efficiency, but that the value of visibility greatly depends on the target products’ replenishment frequencies and the production planning cycle employed by the manufacturer.

Journal

International Journal of Physical Distribution & Logistics ManagementEmerald Publishing

Published: May 1, 2003

Keywords: Supply‐chain management; Demand forecasting; Information exchange; Production planning; Inventory control

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