Optimization of inventory policies of food grain distribution stage in public distribution system

Abstract

Purpose The purpose of this paper is to model the distribution stage of the public distribution system (PDS) and optimize the inventory policy during this stage of the PDS to address some of the inefficiencies present in the system. This study models this supply chain as a multistage supply chain consisting of storage depots, issue centers, fair price shops and card holders. Design/methodology/approach A two-stage modeling approach is used to model the distribution stage in the PDS. In the first stage, the authors developed a simulation model for periodic review-based stock policy with appropriate assumptions. This helped minimize the total supply chain cost (TSCC). The TSCC consists of three cost elements, namely, ordering cost, holding cost and shortage cost. These three cost elements, in turn, depend on inventory policy parameters, such as review periods and base stock levels, at various echelons. In the second stage, a Genetic Algorithm based optimization approach was used. Findings A set of optimal policy parameters was identified. It is observed that base stock levels at issue centers are higher as compared to those in the FPS and the TSCC is less in scenario, when backorder cost is equal to the holding cost. Practical implications Present study will be useful to policy makers in improving PDS performance. This optimization of inventory policies helps actors in the PDS supply chain to choose appropriate policy parameters in the present inventory policy so as to reduce the overall distribution cost. Originality/value Unlike the previous researchers who examined the PDS from the social security perspective and tried to address specific problems to improve functioning of the PDS, this study looked at the problem as a supply chain-related problem and optimized the inventory parameters in one of the subsets of the PDS supply chain.