The potential for disruption to the entire inventory management function schedule

Abstract

In the framework of working capital, inventories hold the most strategic position among business enterprises. It comprises the most substantial portion of current assets in the majority of businesses. The effective management of inventory within the context of working capital is particularly concerning because inventories obstruct about two-thirds of the current assets of cement manufacturers. In the event of a calamitous event, the initiatives worsen supply chain disruptions, thereby introducing a novel compromise between resilience in the face of disruptions and effectiveness in the course of regular operations. When making stocking decisions, operational disruptions are taken into account. These are different from demand uncertainties in terms of the risks they pose because they last longer and stop production flow. As a consequence, operational disruptions can be considerably more catastrophic, despite their low probability of occurring. We use stochastic simulation to find insights that can be used in managing inventory when there is a risk of disruption. These insights come from combining the newsvendor and order-up-to models, which look at the costs of uncertain demand, with catastrophe models, which look at both the cost of a supply disruption and the cost of recovery. These insights pertain to the management function schedule, which is the subject of discussion in this paper.