IDEAS home Printed from https://ideas.repec.org/a/gam/jmathe/v7y2019i8p718-d255632.html
   My bibliography  Save this article

Data-Driven Iron and Steel Inventory Control Policies

Author

Listed:
  • Shih-Hsien Tseng

    (Department of Business Administration, Chung Yuan Christian University, 200 Chung Pei Road, Chung Li District, Taoyuan City 32023, Taiwan)

  • Jia-Chen Yu

    (Department of Information Technology, Walsin Lihwa Corporation, 25F, No.1, Songzhi Rd., Taipei 11047, Taiwan)

Abstract

In this study, we investigated the optimal material inventory policy with regard to the iron and steel industry’s effort to reduce massive overstocking issues in the face of increased corporate competitiveness. We gathered actual data, including sales and inventory numbers, from a steel and iron company over a period of 216 weeks between January 2010 and February 2014. We then utilized the Markov decision process (MDP) to analyze this data for inventory problems, such as relevant reorder points and reorder quantity issues as they relate to lead time, stock on hand and the limitations of having stock in-transit. The purpose of the study was to determine the most effective method for minimizing costs by using the optimal inventory policy to calculate and verify the effectiveness of the results. The final 52 weeks of data were put aside, while the initial 164 weeks were used to create an inbound material receipt system to ultimately establish a yearly (52-week) policy based on the inventory and sales data for weeks 113–164. Finally, we verified the effectiveness of the policy using the data from the final 52 weeks. The results showed that our proposed categorization method was effective for reducing the quantity of inventory while still meeting quarterly demands.

Suggested Citation

  • Shih-Hsien Tseng & Jia-Chen Yu, 2019. "Data-Driven Iron and Steel Inventory Control Policies," Mathematics, MDPI, vol. 7(8), pages 1-15, August.
    • Handle: RePEc:gam:jmathe:v:7:y:2019:i:8:p:718-:d:255632
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-7390/7/8/718/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2227-7390/7/8/718/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ford W. Harris, 1990. "How Many Parts to Make at Once," Operations Research, INFORMS, vol. 38(6), pages 947-950, December.
    2. Hoque, M.A., 2013. "A vendor–buyer integrated production–inventory model with normal distribution of lead time," International Journal of Production Economics, Elsevier, vol. 144(2), pages 409-417.
    3. Yue Dai & Xiuli Chao & Shu-Cherng Fang & Henry L. W. Nuttle, 2006. "Capacity Allocation And Inventory Policy In A Distribution System," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 23(04), pages 543-571.
    4. Chun-Tao Chang, 2004. "Inventory Models With Stock-Dependent Demand And Nonlinear Holding Costs For Deteriorating Items," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 21(04), pages 435-446.
    5. Rossi, Roberto & Tarim, S. Armagan & Hnich, Brahim & Prestwich, Steven, 2010. "Computing the non-stationary replenishment cycle inventory policy under stochastic supplier lead-times," International Journal of Production Economics, Elsevier, vol. 127(1), pages 180-189, September.
    6. Rego, José Roberto do & Mesquita, Marco Aurélio de, 2015. "Demand forecasting and inventory control: A simulation study on automotive spare parts," International Journal of Production Economics, Elsevier, vol. 161(C), pages 1-16.
    7. Heisig, Gerald, 2001. "Comparison of (s,S) and (s,nQ) inventory control rules with respect to planning stability," International Journal of Production Economics, Elsevier, vol. 73(1), pages 59-82, August.
    8. Wang, Pengfei & Wen, Yi & Xu, Zhiwei, 2014. "What inventories tell us about aggregate fluctuations—A tractable approach to (S,s) policies," Journal of Economic Dynamics and Control, Elsevier, vol. 44(C), pages 196-217.
    9. Richard Bellman, 1954. "Some Applications of the Theory of Dynamic Programming---A Review," Operations Research, INFORMS, vol. 2(3), pages 275-288, August.
    10. D J Robb & E A Silver, 2006. "Erratum: Inventory management under date-terms supplier trade credit with stochastic demand and leadtime," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 57(6), pages 755-755, June.
    11. D J Robb & E A Silver, 2006. "Inventory management under date-terms supplier trade credit with stochastic demand and leadtime," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 57(6), pages 692-702, June.
    12. Eugene A. Feinberg & Mark E. Lewis, 2018. "On the convergence of optimal actions for Markov decision processes and the optimality of (s, S) inventory policies," Naval Research Logistics (NRL), John Wiley & Sons, vol. 65(8), pages 619-637, December.
    13. Fleischmann, Moritz & Kuik, Roelof, 2003. "On optimal inventory control with independent stochastic item returns," European Journal of Operational Research, Elsevier, vol. 151(1), pages 25-37, November.
    14. Liu, Mingwu & Feng, Mengying & Wong, Chee Yew, 2014. "Flexible service policies for a Markov inventory system with two demand classes," International Journal of Production Economics, Elsevier, vol. 151(C), pages 180-185.
    15. Zhang, Xueqing & Gao, Hui, 2012. "Road maintenance optimization through a discrete-time semi-Markov decision process," Reliability Engineering and System Safety, Elsevier, vol. 103(C), pages 110-119.
    16. Chirag Surti & Elkafi Hassini & Prakash Abad, 2013. "Pricing And Inventory Decisions With Uncertain Supply And Stochastic Demand," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 30(06), pages 1-25.
    17. Richard Bellman, 1954. "On some applications of the theory of dynamic programming to logistics," Naval Research Logistics Quarterly, John Wiley & Sons, vol. 1(2), pages 141-153, June.
    18. Marco Bijvank, 2014. "Periodic review inventory systems with a service level criterion," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 65(12), pages 1853-1863, December.
    19. Arıkan, Emel & Fichtinger, Johannes & Ries, Jörg M., 2014. "Impact of transportation lead-time variability on the economic and environmental performance of inventory systems," International Journal of Production Economics, Elsevier, vol. 157(C), pages 279-288.
    20. Arikan, E. & Fichtinger, J. & Ries, J. M., 2014. "Impact of transportation lead-time variability on the economic and environmental performance of inventory systems," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 63386, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    21. Xiangpei Hu & Huimin Wang & Yunzeng Wang, 2012. "Inventory Decisions With Decreasing Purchasing Costs," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 29(01), pages 1-14.
    22. Huiqing Ouyang & Xiangyang Zhu, 2009. "A Simple Algorithm For The Basic(R, Q)Inventory Control Model With Return Flow," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 26(03), pages 383-398.
    23. Ahiska, S. Sebnem & Appaji, Samyuktha R. & King, Russell E. & Warsing, Donald P., 2013. "A Markov decision process-based policy characterization approach for a stochastic inventory control problem with unreliable sourcing," International Journal of Production Economics, Elsevier, vol. 144(2), pages 485-496.
    24. Bacchetti, Andrea & Saccani, Nicola, 2012. "Spare parts classification and demand forecasting for stock control: Investigating the gap between research and practice," Omega, Elsevier, vol. 40(6), pages 722-737.
    25. Kimitoshi Sato & Katsushige Sawaki, 2012. "Optimal Ordering Policies With Stochastic Demand And Price Processes," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 29(06), pages 1-21.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wu, Zhengping & Zhai, Xin & Liu, Zhongyi, 2015. "The inventory billboard effect on the lead-time decision," International Journal of Production Economics, Elsevier, vol. 170(PA), pages 45-53.
    2. Svoboda, Josef & Minner, Stefan & Yao, Man, 2021. "Typology and literature review on multiple supplier inventory control models," European Journal of Operational Research, Elsevier, vol. 293(1), pages 1-23.
    3. David A. Goldberg & Martin I. Reiman & Qiong Wang, 2021. "A Survey of Recent Progress in the Asymptotic Analysis of Inventory Systems," Production and Operations Management, Production and Operations Management Society, vol. 30(6), pages 1718-1750, June.
    4. Mizutani, Daijiro & Nakazato, Yuto & Ikushima, Rie & Satsukawa, Koki & Kawasaki, Yosuke & Kuwahara, Masao, 2024. "Optimal intervention policy of emergency storage batteries for expressway transportation systems considering deterioration risk during lead time of replacement," Reliability Engineering and System Safety, Elsevier, vol. 242(C).
    5. Xiaoyue Li & John M. Mulvey, 2023. "Optimal Portfolio Execution in a Regime-switching Market with Non-linear Impact Costs: Combining Dynamic Program and Neural Network," Papers 2306.08809, arXiv.org.
    6. Mahmoud Mahfouz & Angelos Filos & Cyrine Chtourou & Joshua Lockhart & Samuel Assefa & Manuela Veloso & Danilo Mandic & Tucker Balch, 2019. "On the Importance of Opponent Modeling in Auction Markets," Papers 1911.12816, arXiv.org.
    7. Ben-Ammar, Oussama & Bettayeb, Belgacem & Dolgui, Alexandre, 2019. "Optimization of multi-period supply planning under stochastic lead times and a dynamic demand," International Journal of Production Economics, Elsevier, vol. 218(C), pages 106-117.
    8. Davis-Sramek, Beth & Robinson, Jessica L. & Darby, Jessica L. & Thomas, Rodney W., 2020. "Exploring the differential roles of environmental and social sustainability in carrier selection decisions," International Journal of Production Economics, Elsevier, vol. 227(C).
    9. Chia-Nan Wang & Thanh-Tuan Dang & Ngoc-Ai-Thy Nguyen, 2020. "A Computational Model for Determining Levels of Factors in Inventory Management Using Response Surface Methodology," Mathematics, MDPI, vol. 8(8), pages 1-23, July.
    10. Dara G. Schniederjans & Mehrnaz Khalajhedayati, 2021. "Competitive sustainability and stakeholder engagement: Exploring awareness, motivation, and capability," Business Strategy and the Environment, Wiley Blackwell, vol. 30(2), pages 808-824, February.
    11. Konur, Dinçer & Campbell, James F. & Monfared, Sepideh A., 2017. "Economic and environmental considerations in a stochastic inventory control model with order splitting under different delivery schedules among suppliers," Omega, Elsevier, vol. 71(C), pages 46-65.
    12. Boute, Robert N. & Gijsbrechts, Joren & van Jaarsveld, Willem & Vanvuchelen, Nathalie, 2022. "Deep reinforcement learning for inventory control: A roadmap," European Journal of Operational Research, Elsevier, vol. 298(2), pages 401-412.
    13. Dawei Chen & Fangxu Mo & Ye Chen & Jun Zhang & Xinyu You, 2022. "Optimization of Ramp Locations along Freeways: A Dynamic Programming Approach," Sustainability, MDPI, vol. 14(15), pages 1-13, August.
    14. Harrold, Daniel J.B. & Cao, Jun & Fan, Zhong, 2022. "Data-driven battery operation for energy arbitrage using rainbow deep reinforcement learning," Energy, Elsevier, vol. 238(PC).
    15. Vanvuchelen, Nathalie & De Boeck, Kim & Boute, Robert N., 2024. "Cluster-based lateral transshipments for the Zambian health supply chain," European Journal of Operational Research, Elsevier, vol. 313(1), pages 373-386.
    16. Bartłomiej Kocot & Paweł Czarnul & Jerzy Proficz, 2023. "Energy-Aware Scheduling for High-Performance Computing Systems: A Survey," Energies, MDPI, vol. 16(2), pages 1-28, January.
    17. Wadi Khalid Anuar & Lai Soon Lee & Hsin-Vonn Seow & Stefan Pickl, 2021. "A Multi-Depot Vehicle Routing Problem with Stochastic Road Capacity and Reduced Two-Stage Stochastic Integer Linear Programming Models for Rollout Algorithm," Mathematics, MDPI, vol. 9(13), pages 1-44, July.
    18. Peter Schober & Julian Valentin & Dirk Pflüger, 2022. "Solving High-Dimensional Dynamic Portfolio Choice Models with Hierarchical B-Splines on Sparse Grids," Computational Economics, Springer;Society for Computational Economics, vol. 59(1), pages 185-224, January.
    19. Matthias Breuer & David Windisch, 2019. "Investment Dynamics and Earnings‐Return Properties: A Structural Approach," Journal of Accounting Research, Wiley Blackwell, vol. 57(3), pages 639-674, June.
    20. Jianxin Chen & Yong-Wu Zhou, 2017. "A Risk-Averse Newsvendor Model Under Trade Credit Contract with CVaR," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 34(03), pages 1-20, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jmathe:v:7:y:2019:i:8:p:718-:d:255632. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.