Supply chain management consists of finding the right balance between conflicting objectives. They can be classified into three categories: cost, inventory and service. Even if inventory has holding costs, its main characteristic is that it is locked-in capital until it is transformed or sold. Similarly, delays in client service or the resulting loss of reputation are hard to express as a cost.
The automotive and luxury industries are good examples of these conflicting objectives. In the automotive industry, high inventory is impossible because of depreciation and the diversity of products. However, the service level must be high due to high competition. In the luxury industry, availability of the right product in the right store is more critical than production costs but high levels of inventory are still impossible.
In general, industrial agility, which is the ability to face variations in customer’s demand is an efficient way to be competitive if two conditions are satisfied. First, the cost of agility should be reasonable and second, agility should not be achieved as a result of high inventory levels. For a company, defining its agility is therefore finding a balance between cost, inventory and service.
Working with the CERMICS (research centre in applied mathematics at Ecole des Ponts ParisTech), we deal with this multi-objective problem at several level of the supply chain.