Inventory replenishment control: A predictive approach

In this paper, the inventory efficient management problem is investigated from a control theory viewpoint. The goods are replenished with delays from a remote supplier. The main objective is to obtain the inventory keeping cost-benefit trade-off by reduction of undesirable influences of system uncertainties, such as unpredictable demand and lead time, on inventory level stability. The starting point, which is a periodicreview predictive approach to inventory replenishment, brings the advantage of consideration of unpredictable system dynamics while finding the optimal order quantities. In contrast to the classical approaches to inventory control, the proposed predictive policy aims at reducing the inventory level fluctuations and maintaining it at desired level. This is considered to be advantageous in decreasing a storage capacity, backorders, lost business opportunities, employment planning problems and deterioration of products. Attention is paid to making the decision framework as simple as possible, and straightforward in application which will allow bridging the gap between mathematical precision of control theory methods and the expectations of supply chain supervisors. The simplified model is presented in the paper and demonstrated to be mathematically equivalent to the initial predictive model.