OUT strategy and application to supply chain networks Online publication date: Sat, 08-Jul-2006
by Jian Huang, Guohua Chen, Tiaojun Xiao, Zhaohan Sheng
International Journal of Services Operations and Informatics (IJSOI), Vol. 1, No. 1/2, 2006
Abstract: In this paper, firstly we consider a more realistic Order-Up-To (OUT) strategy usually adopted by many managers which includes the variable desired inventory and the desired Work In Process (WIP) that are both proportional to the expected demand. Then, we investigate the stability properties of an order-inventory system applying this realistic OUT strategy and give appropriate managing strategies. Moreover, we consider this realistic OUT strategy in a typical one-dimensional supply network model, as the stability characteristics are the base of reforming the supply chain networks. By linear stability analysis, we find that the whole supply chain network will be stable in a certain space of the parameters and may exhibit unstable behaviour in another parameters space. Therefore, managers must be careful to modulate their order and inventory policies to increase the stability of their supply chain networks.
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