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Quantifying the costs of cycle counting in a two-echelon supply chain with multiple items

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  • Gumrukcu, Seda
  • Rossetti, Manuel D.
  • Buyurgan, Nebil

Abstract

Inventory record errors within a supply chain can lead to problems that cause low customer satisfaction and high operational costs. This paper presents a simulation model of a two-echelon inventory system consisting of a retailer, a distribution center, and a supplier that includes multiple item types and the use of cycle counting as the corrective action. An extensive set of cycle-counting configurations were examined while observing the trade-off between fill rates, accuracy, and system costs in order to investigate the best possible configuration of cycle counting for two set of experiments that examine high-demand-low-cost and low-demand-high-cost items. The results indicate that the correct application of cycle counting will increase record accuracy and provide significant amount of savings for the entire supply chain.

Suggested Citation

  • Gumrukcu, Seda & Rossetti, Manuel D. & Buyurgan, Nebil, 2008. "Quantifying the costs of cycle counting in a two-echelon supply chain with multiple items," International Journal of Production Economics, Elsevier, vol. 116(2), pages 263-274, December.
    • Handle: RePEc:eee:proeco:v:116:y:2008:i:2:p:263-274
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    References listed on IDEAS

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    1. Tee, Yeu-San & Rossetti, Manuel D., 2002. "A robustness study of a multi-echelon inventory model via simulation," International Journal of Production Economics, Elsevier, vol. 80(3), pages 265-277, December.
    2. Nicole DeHoratius & Ananth Raman, 2008. "Inventory Record Inaccuracy: An Empirical Analysis," Management Science, INFORMS, vol. 54(4), pages 627-641, April.
    3. Fleisch, Elgar & Tellkamp, Christian, 2005. "Inventory inaccuracy and supply chain performance: a simulation study of a retail supply chain," International Journal of Production Economics, Elsevier, vol. 95(3), pages 373-385, March.
    4. Nicole DeHoratius & Adam J. Mersereau & Linus Schrage, 2008. "Retail Inventory Management When Records Are Inaccurate," Manufacturing & Service Operations Management, INFORMS, vol. 10(2), pages 257-277, November.
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    2. Gel, Esma S. & Erkip, Nesim & Thulaseedas, Anoop, 2010. "Analysis of simple inventory control systems with execution errors: Economic impact under correction opportunities," International Journal of Production Economics, Elsevier, vol. 125(1), pages 153-166, May.
    3. Agrawal, Paras M. & Sharda, Ramesh, 2012. "Impact of frequency of alignment of physical and information system inventories on out of stocks: A simulation study," International Journal of Production Economics, Elsevier, vol. 136(1), pages 45-55.
    4. Cannella, Salvatore & Framinan, Jose M. & Bruccoleri, Manfredi & Barbosa-Póvoa, Ana Paula & Relvas, Susana, 2015. "The effect of Inventory Record Inaccuracy in Information Exchange Supply Chains," European Journal of Operational Research, Elsevier, vol. 243(1), pages 120-129.
    5. Zhang, Allan N. & Goh, Mark & Meng, Fanwen, 2011. "Conceptual modelling for supply chain inventory visibility," International Journal of Production Economics, Elsevier, vol. 133(2), pages 578-585, October.
    6. Cannella, Salvatore & Dominguez, Roberto & Framinan, Jose M., 2017. "Inventory record inaccuracy – The impact of structural complexity and lead time variability," Omega, Elsevier, vol. 68(C), pages 123-138.

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