Application of Genetic Algorithm to Supply Chain Inventory Optimization

Abstract

A key concern for global manufacturers today is to control inventory and distribution related costs and so inventory management is considered to be a very important area in Supply chain management. Efficient and effective management of inventory throughout the supply chain significantly improves the ultimate service provided to the customer. Hence, to ensure minimal cost for the supply chain, the determination of the inventory to be held at various levels in a supply chain is unavoidable. Minimizing the total supply chain cost refers to the reduction of holding and shortage cost in the entire supply chain. Efficient inventory management is a complex process which entails the management of the inventory in the whole supply chain. The dynamic nature of the excess stock level and shortage level over all the periods is a serios issue when implementation is considered. The complexity of the problem increases when more agents are involved under a distribution center. In particular , we have considered a single factory manufacturing different types of products to be sent to a distribution center and only selective products as required, are sent to respective agents. In this paper these issues of inventory management have been focused and a novel approach based on Genetic Algorithm has been proposed in which the most probable excess stock level and shortage level required for inventory optimization in the supply chain is distinctively determined so as to achieve minimum total supply chain cost.