Supplying Chain Inventory Policy For Deteriorating Items In Time Varying Demand Environment

Supplying Chain management was first evoluted from logistics management. In the current competitive environment of the global market, the living pressure of enterprises is becoming heavier and heavier. Enterprises needs to cut the cost, improve the service and to deliver on time to meet the demands of the market. It is obviously unrealistic for a enterprise to manage all by himself to control from purchasing, production to distribution. In fact, the development of the third party logistics make it possible to provide a new kind of professional service.A very important theory in SCM is to coordinate each part in the supplying chain, which means we only use the key informations to control and operate the enterprise. Supplying Chain is a chain that is composed of different enterprises, but for each, it has its own benefits. So it is much more harder to coordinate.Inventory in the supplying chain is a sum of all the physical and logical materials in the warehouse. It contains raw materials ,machining parts, products on line and emergency parts. The reason we have inventories is complex, but each kind of inventories has its own cause. We can reduce inventories efficiently if we find these reasons. Inventories is not harmful in every cases, sometimes it is a must in a enterprise, but in more occasions, it brings cost. Overdue inventories will take much cash flow, which is very critical for new creations and developments. For those JIT parts in the inventory, efficient management will have more effects.The key factor of the SCM is the coordination and cooperation of each enterprise on the chain, and inventory coordination is a very important part of the SCM coordination. Traditional optimal inventory policy is based on the local optimization of a separated enterprise, it focused all the energy on the inventories within the enterprise , the result is enterprises on the chain conflicts, logistics flow is rough, higher inventory cost and lower service level.Inventories exists in every part of the Supplying chain. Inventory control is very important in the SCM. When we make a inventory policy, we must know how much it influences the cost. Cost that we mentioned in Inventory decisions includes replenishment cost, holding on cost, shortage cost and some related cost. The function of SCM is to pursue efficiency and cost validity in the whole system, to minimum the system cost .This cost includes delivery cost, raw material cost, on line product cost and inventory cost for final product. So the key point in SCM is not simply to minimum delivery cost or reduce inventory, the most important is to use system methodology to do SCM. In the past 30 years, many scientists have paid more attention the supplying chain cost In a recent survey, it illustrated that supplying chain cost has been a very big part in the whole operation cost, in some industries, the number is higher than 75%.But through efficient management, it is easy to reduce the supplying chain cost to 25%.In fact, in a supplying chain with a good management, the cost advantage is 45% higher than its components. Supplying chain cost includes financial cost, MIS cost, Material Planning Cost, Inventory cost, purchasing cost and order management cost, within which inventory cost and supplying chain cost is the most important part, roughly higher than 30%.In the past, most of the supplying chain models are established in a static environment. This static environment means the demand is stable. However with the development of modern technology, life cycle of the products has been shortened. Time has been a very important factor which influences the price ,demands and profit, especially the high-tech products. Because of this time varying factor, we need to change our decision method. For example the classical EOQ model, the hypothesis of which is the quantity in each circle is the same, however in time varying environment, this hypothesis is not that appropriate, because the order quantity in each circle is not the same which means the order quantity is also time varying. Although some scientists made some efficient research in time varying environment, but it is limited in a separate enterprise. As a matter of fact ,we need to study the optimal policy in a time varying environment.Deteriorating products is a great part in our life ,which means the products will deteriorate, separate during storage. In real life ,the corruption of fruits and vegetables is so common. These deteriorating phenomenon will greatly influences our inventory policy and cost control.As mentioned above, the article studied the optimal supplying chain model of deteriorating products in a time varying environment, and use matlab to testify the model. The article set up a time varying model for deteriorating products based on the existing article, and we make a presumption that the replenishment cycle is equal. We have two possibilities: 1. We have a substitute supplier 2.We don't have a substitute supplier. In each occasion, we make a optimization for a single enterprise and the whole supplying chain. After comparison, we get the conclusion that in each occasion, the optimal policy for supplying chain is better than the optimal policy for a single supplier.