Omni-Chanel Network Design towards Circular Economy under Inventory Share Policies

Abstract

In this paper, we study inventory share policies in an omni-channel supply network, to contribute to the circular economy (CE) concept. Lateral inventory share implementation provides flexibility and profitability in the supply chain by allowing inventory share between the same echelon locations in a network. Total holding costs and transportation costs can be reduced by lateral inventory share applications, which also contribute to decreased material usage for production over time, as well as reduced CO2 emission released by transportation. Technological and Internet of Things (IoT) developments make it possible for companies to share their real-time information with each other for uninterrupted marketing experiences. With such a connected network, companies aim to increase their profitability and responsiveness to their customers. We explore a well-designed inventory share policy towards the CE concept under an (s, S) inventory control policy. We simulate several pre-defined share designs by Arena 16.0 commercial software and compare their performances in terms of cost, responsiveness, transportation frequency, inventory held, etc. The results show that, by the implementation of a well-designed lateral inventory share policy, an omni-channel network can benefit from decreased holding cost and transportation cost, contributing to the CE concept.