Efficient Inventory Optimization of Multi Product, Multiple Suppliers with Lead Time using PSO

TL;DR

This paper proposes a particle swarm optimization-based method for optimizing inventory levels across multiple products and suppliers with variable lead times, aiming to minimize supply chain costs and avoid shortages.

Contribution

It introduces a novel PSO-based approach for multi-product, multi-supplier inventory optimization considering variable lead times, improving upon existing methods.

Findings

PSO effectively minimizes inventory costs in complex supply chains.

The method adapts to fluctuating lead times for better stock level management.

Results show significant cost savings compared to traditional approaches.

Abstract

With information revolution, increased globalization and competition, supply chain has become longer and more complicated than ever before. These developments bring supply chain management to the forefront of the managements attention. Inventories are very important in a supply chain. The total investment in inventories is enormous, and the management of inventory is crucial to avoid shortages or delivery delays for the customers and serious drain on a companys financial resources. The supply chain cost increases because of the influence of lead times for supplying the stocks as well as the raw materials. Practically, the lead times will not be same through out all the periods. Maintaining abundant stocks in order to avoid the impact of high lead time increases the holding cost. Similarly, maintaining fewer stocks because of ballpark lead time may lead to shortage of stocks. This also happens in the case of lead time involved in supplying raw materials. A better optimization methodology that utilizes the Particle Swarm Optimization algorithm, one of the best optimization algorithms, is proposed to overcome the impasse in maintaining the optimal stock levels in each member of the supply chain. Taking into account the stock levels thus obtained from the proposed methodology, an appropriate stock levels to be maintained in the approaching periods that will minimize the supply chain inventory cost can be arrived at.