TRACKING SIGNALS IN INVENTORY CONTROL-SYSTEMS - A SIMULATION STUDY

The purpose of this analysis is to evaluate three different tracking s ignal models. From the point of view of inventory control, we are inte rested in examining the tracking signal's impact on inventory control performance as measured by the resulting costs - including holding cos ts, order costs, and shortage costs. In this analysis we are dealing w ith an inventory control problem for thousands of different items (typ ical class B items) with independent demand. It is therefore assumed t hat inventory is controlled using a simple and in practical inventory control often used (s, Q) system, where the order quantity is calculat ed using the EOQ formula, and the order point is determined using a we ll-known stochastic inventory model. The method used will be stochasti c simulation, by which it is possible to simulate the practical use of the tracking signal models together with theoretical inventory models . The simulations are carried out for different items where the probab ility distribution of demand is a dynamic normal distribution, with me ans describing different time-dependent demand patterns, including tre nds and different seasons.The conclusion, based on the simulation resu lts, leads to some guidelines on implementing tracking signal methods in inventory control systems.