Effect of component interdependency on inventory allocation

Abstract

The objective of this research approach is to improve the responsiveness and agility of the supply chain network by considering the allocation of inventory control, especially for the allocation of safety stock. This is achieved through con- sidering the effect of components interdependencies and offering guaranteed lead times. An analytical model is presented in this paper, which is supported by discrete event simulation model in order to investigate the effect of material interdependency on the reduction to safety stock allocation. A case example from lead acid battery manufacturing supply chain network is used to demonstrate the applicability of the models. The results, by applying design structure matrix (DSM), showed that less material interdependency reduces the safety stock allocation significantly. The ma- terial interdependencies are reduced through clustering operation. The results also showed that reduction of material interdependency reduces the unnecessary invest- ment in inventory management. The difference between the presented analytical model and the discrete event simulation is not significant, which also validate the proposed modeling approach.