A Hybrid Stock optimization Approach for Inventory Management

Modern world is rapidly evolving around knowledge and business that know how to use knowledge shows superiority. Thus, smart decision making becomes vital for the modern business world to achieve sustainability in life and business. Especially, with a world of scarce resources, utilizing knowledge would play critical not only today but also for future. Moreover, using knowledge is inevitable in supply chain and inventory management must be supported with smart algorithms and modern heuristics to avoid excessive inventory while fighting with stockout. Therefore, this study explores the opportunity for inventory planning with heuristics and tailored techniques as well as how to hybridize modern heuristics and tailored techniques. In this study, inventory optimization experiments are proposed to model spare part inventory management and find the best way to determine reorder amount to deal with shortage and excessive inventory. Four heuristics which are i basic golden ratio, iisimulated annealing, iii statistical rule-based heuristic and iv hybrid algorithm of simulated annealing and statistical rule-based heuristic are evaluated on existing spare part dataset with an example from real-life part supplier named Eldor. In this test case, 400 products are analyzed, and best reorder points and amounts are selected with the help of heuristics. Heuristics' main structures and parameters are adjusted for the problem's need and improvement on quality of results. Parameters are determined according to trial and error with experts' guidance on heuristics. The best result suggests 8% improvement on cost and 37% improvement on inventory load could achieve with the help of heuristics. These solutions are usable against even hard constraints like shortage.