Title of the paper : An Analysis of the Effect of Inventory Record Inaccuracy in a Two - Echelon Supply Chain

Department at the University of Arkansas. He has published over 65 journal and refereed conference articles in the areas of transportation, manufacturing, health care and simulation and has obtained over $3.1 million dollars in research funding. His research interests include the design, analysis, simulation, and optimization of inventory and logistics systems. He serves as an Associate Editor for the International Journal of Modeling and Simulation and is active in IIE, INFORMS, and ASEE. He is co-editor for the WSC 2009 conference. As the author or co-author of over 30 technical papers, his research and teaching interests include network-centric systems, Auto-ID technologies, and modelling and analysis of discrete event systems. KIRAN CHITTORRI is Corporate Business Modeler at FedEx Freight where he is responsible for modelling terminal and network operations. Mr. Chittorri completed his Masters Degree in the Department of Industrial Engineering at the University of Arkansas in 2005. His areas of interest include simulation and inventory system modelling. Abstract This paper examines the effect of inventory record inaccuracy within the context of a two-echelon supply chain. The system consists of an external supplier, a distribution centre, and a retail level. Each location operates under an (R, Q) reorder point reorder quantity inventory control policy with backordering permitted. The model introduces count-based discrepancies into the inventory records and measures the effect on system performance at the locations and throughout the supply chain. A set of simulation experiments examines two fundamental methods to mitigate the effect of inaccurate inventory records: carrying extra inventory to protect against the errors and using cycle counting procedures to correct the records over time. In addition, the effect of learning through the use of cycle counting procedures and error reduction methods and the effect of non-compliance (not correcting records) within the system are explored. The results indicate that cycle counting can have significant positive effects within the entire supply chain. In addition, the experiments show that the learning effect has benefits both locally and throughout the supply chain. The results also show that non-compliance to the cycle counting procedure by locations within the chain can have significant detrimental effects on supply chain partners and overall supply chain performance.