Time Delay Effects in Computerised Physical Distribution Systems

Computerising inventory control procedures is usually an attempt to gain better control over stock availability. The effectiveness of the procedures depends on the time delays imparted by such events as order processing and delivery. Through these time delays, much of a finished goods physical distribution system is linked together through the inventory control procedures. Changing the length of any one time element through changes in inventory stocking rules, order processing methods or selected transportation services impacts on the economics of the entire physical distribution system. Little is understood about the effects of time change in such complex systems. In this article, the actual computer inventory control procedures of a chemical company were computer simulated. Physical distribution system design decisions and their associated time delay effects were explored by interrogating the model. Surprising effects were discovered, some of them being counter‐intuitive to what simple theory would predict. Management guidelines were provided as to the system‐wide economic consequences of change in individual elements of a physical distribution system.