Impact of product complexity on inventory levels

Abstract

In this thesis we consider a manufacturing and distribution supply chain of a roll-based product whose width comes in 1-cm increments. We formulate a computer model subject to stochastic, inelastic demand to determine the relationship between width interval and finished goods inventory levels. Assuming that the supply chain operates with the same set of policies regardless of the width interval value, we illustrate that the value of risk pooling diminishes as the interval widens. Due to the presence of a counteracting effect, we also demonstrate that increasing the width interval does not always reduce the amount of inventory requirements. Lastly, we show that the supply chain can operate with lower inventory levels without compromising the service level by pushing the inventory down the chain.