The impact of forecasting error, stream level, and control mechanism of the supply chain enhanced by theory of constraints on the order fill rate and the inventory level

This research aims to validate the usefulness of the theory of constraints (TOC) principles for supply chain management. Such validation starts with the assessment of the impact of forecasting error, the stream level of supply chain partners, and the choice of supply chain control mechanism on the performance of a supply chain enhanced by TOC. Specifically, throughput dollar days (TDDs) and inventory dollar days (IDDs) were used as supply chain control measures. The results revealed that TOC-enhanced supply chain performance hinges on the extent of demand forecasting error and that the stream level (being in the upstream or downstream) of the supply chain partner tended to influence its inventory size and the subsequent inventory carrying cost, whereas the stream level had little to do with the supply chain partner's order fill rate. Furthermore, the dynamics of the supply chain control mechanism with regard to supply chain performance have been analysed.