Research On Inventory Cost Control Based On System Dynamics

The inventory management and decision-makings have been playing an important role in the business administration. The object of the inventory management is to satisfy the customer's demand with minimum inventory cost; and the key factor of inventory policy is how to decide the quantity and timing of every order, which can meet the goal of the inventory management. Aims at the supervision strategy of business inventory system today, is still to make use of mathematics and statistics computational method to get the most economic order quantity (EOQ), and the best opportune moment of reorder point. However, the different inventory policy related to different stockholding cost assembly. All the business administrators are looking for the balance point between service and cost, the complex relation in this dynamic state is not a general intuition thinking or simple computing criterion can acquire among the best solution. So this paper makes use of the System Dynamics (SD) model and aim at the inventory cost, service level setting and out-of-stock strategy to do the system simulation analysis application. Through the research of this paper, the following research results can be included:Firstly, a system dynamics model is presented which can analyze the dynamic relationship between the inventory policy and inventory cost, including the fundamental inventory policy, related costs of inventory, evaluation of the performance of the inventory policy.Secondly, the dynamics model among the different inventory policies is studied, which can explore the situation of changing of the individual inventory cost and analyze the dynamic state of the inventory assembly, service level setting and businesses to operate the performance change.Thirdly, a series of simulation analysis for business performance are studied based on different inventory cost combination and service level setting. And the impact of business is analyzed in this research while the business at the service level setting and stock out strategy is not appropriated.