An Inventory Management Model in Mobile Commerce

Yingfei Zheng Shanghai Institute of Foreign Trade

Finance & Management School Shanghai, P.R.C.

e-mail: yfzheng2003@163.com

Xianghui Meng Shanghai Jiao Tong University

School of Mechanical Engineering Shanghai, P.R.C.

e-mail: xhmeng@sjtu.edu.cn

Abstract—In the mobile commerce environment, inventory management evolved into mobile inventory management. The latter is different from the traditional inventory management in many ways. In this paper, an integrated practical model is developed to enhance the inventory management in mobile commerce. The key points to develop this practical inventory management model include determining the order point quantity, determining the economic order quantity and determining the safety stock. In the last section, the applicability of this model was examined, which proved that this model made the mobile inventory management to be a routine.

Keywords- Mobile Commerce; Inventory Management model; Mobile Inventory Management

I. INTRODUCTION Nowadays, the rapid development of mobile

communication technologies promote the mobile commerce to a great extent, they offer varieties of services to users. For example, Mobile subscribers can use their personal trusted devices (PTDs) to access any resource which they need and conduct their business freely at any time from anywhere [1]. Clearly, mobile commerce, where users equipped with PTDs, such as personal digital assistants (PDAs), cell phones, and laptops are free to move while keeping connected to service networks, which provides large opportunities for users, such as ubiquity, accessibility, personalization and etc.[2].

On the other hand, inventory management plays a very important role in the process of enterprise management. Its major functions are as follows: Reduce the head time. Be moderate in reducing the

head time can play down the security stocks, lessen the overstock goods, accelerate the found-turnover and etc.

Enhance the equilibrium of production. Relying on the effective inventory management, we can reinforce the information transparency in the system of production, providing, and distribution [3]. For which, we can arrange warehouses in all levels at a reasonable situation. Depending on this, the short of stocks or overdue stocks will be avoided effectively.

Reduce the order cost. Basing on the re-order-point and economy-batch model, we can improve the order decision making, and reduce the order cost.

Enhance the service level. Depending on the scientific inventory management, we can delivery goods exactly

and in time, which enhance the service level of the corporation to some extent, and gain more marketing share for the corporation.

The topic of mobile commerce is still under development and offers potential for further research and applications, as this subject is just at the stage of development. What is more, although large volumes of literatures are available on mobile commerce [4], there are deep gaps between theory and practice. It’s necessary for us to bring mobile commerce to practice. Naturally, we can introduce it to daily operation management, such as inventory management.

As the development of mobile commerce boosts the world economy and trading, integrating inventory management and mobile commerce will gain advantages for the corporations which implement mobile inventory management. However, there are also many issues both in inventory management and mobile commerce. Discussing the mobile inventory management is necessary and meaningful. Furthermore, based on existing theory and practical models of inventory management and mobile commerce [5], we built a practicable mobile inventory management model to conduct the business for the corporations.

This paper was organized as follows: the next section discusses the necessity and feasibility of studying inventory management in mobile commerce; the third section advances an inventory management model in mobile commerce; the fourth section discusses the practicability of this very model; the last section disclose some issues which need to be solved and some topics which could be studied in the future.

II. THE INVENTORY MANAGEMENT MODEL IN MOBILE COMMERCE

Before discussing the mobile inventory management, we review the traditional inventory management. At first. Large quantities of successful cases on implementation inventory management indicate that inventory management will produce huge economic benefit, even if it is just a simple one. Therefore, inventory management is very essential to corporations, the relative researches is necessary, even there are large gaps between theory and practice.

In order to optimize inventory management and make s satisfied with their services [6], there are lots of inventory

2010 International Conference of Information Science and Management Engineering

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DOI 10.1109/ISME.2010.35

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management models advanced by logistics researchers. All of these constitute a huge inventory management field. Some of them are based on existed models, and the rest are new and rely on mathematical theory.

Even though there are lots of arithmetic and models about inventory control, when they come to practice, some of them are inefficacy. Most of these models are complex and obscure. What is more, as the increasing of inventory management models, how to select a model, which is reasonable and simple for use, drives the managers into a tough proposition. As a result, examine the application condition, scope, and environment is necessary.

Relying on different demanding objectives, operating methods, inventory management control method, inventory management models can be classified into 20 types in detail, by and large, all of them belong to ration or periodic inventory management models to some extent.

In the mobile commerce environment, inventory management evolved into mobile inventory management. Owning to the prompt, convenient, portable of the mobile devices, we can achieve real time inventory status information in work site to the fullest extent at anytime from anywhere. With adopting wireless network technology and bar code technology, inventory information is avoided secondary process by administrators.

Furthermore, the sticking point in the inventory management is how to maintain the appropriate stocks level and the order quantity in each order. Also, it’s important in the mobile environment. However, in the traditional inventory management, there are great time lags between the stocks status and the manager who is in charge of it, which makes it difficult to forecast the rational inventory. But, in the mobile commerce environment, we can acquire the necessary information at any time from any where, which help us own the most accurate dada. Based on this condition, we can constitute a model, in order to determine the exact relative data.

To some extent, it’s necessary for us to examine the practical models of inventory management in mobile commerce [7]. However, is it feasible for us to advance this very model? And, whether this model is practicable or not?

Although rarely literatures about the integrating models of inventory management in mobile commerce are available, there are many studies both on inventory management and mobile commerce, which include lots of practicable models. Relying on this, we can disclose our inventory management model.

In this paper, we advance two types of inventory management models in the mobile commerce environment, which can be easily applied by corporations. In these models, we are able to gain the timely information by our PTDs and the wireless web sites. And then, we can determine reasonable inventory data by these mobile inventory management models.

III. THE RATION INVENTORY MANAGEMENT IN MOBILE COMMERCE

As to the ration inventory management, we determine the order point quantity and the order quantity in advance. Then, check the inventory at times when the inventory comes down to the order point, inform relative department to sending order invoice, and the order quantity is always the economic order quantity.

We mainly discuss the situation that one corporation is treated as a customer to another corporation [8, 9]. No matter the corporation is a producer or a distributor, it can be regarded as a customer. As a producer, it needs materials, and then it is a customer to the materials providers. As a distributor, it is a customer to its upstream corporations. Therefore, the ration mobile inventory management model can be illustrated as fig 1:

Casually

Customer

Personal trusted devices Wireless web sites

Inventory inspecting Purchasing Payment

Stocks<=OP

Supplier

Ordering Yes

No

Delivering

Payment

Fig 1: The ration mobile inventory management model

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Usually, there are three primary problems in the inventory management, first, when to replenish the stocks; second, how to replenish the stocks; and last, how to remain the safety stocks. In this model, customers implement their business by personal trusted devices through wireless websites. At the first stage, customers use their mobile devices to inspect the stocks status information casually. If found out the stocks is below or equal to the order point, send out ordering invoice to their suppliers, else, continuing inspect the inventory situation. Once the suppliers receive the order, they delivery the goods by any means. At last, the customers pay for their order. And a mobile inventory management circle is over.

The key points of this model include determining the order point quantity, the economic order quantity and the safety stock.

A. Determining the order point When we use this order point method, we always assume

that the lead time pT and the daily consuming quantity qC is stable, the order time changes as the consuming rate. Relying on this, we can come to the order point quantity

pQ :

*p p qQ T C

The daily consuming quantity qC comes from the data

of our corporations, and the lead time pT is determined by the time between sending out the order and receiving the goods.

B. Determining the economic order quantity The economic order quantity model base on single

product management, once it is used in else situation, this model should changed to some extent. First of all, we assume that:

H1 The annual demanding quantity is D ; H2 The ordering cost in each time is K ; H3 The annual storing cost of each product is h ; H4 There is no lead time; H5 There should not be out of stock. Then, the economic order quantity *Q is:

* (2* * ) /Q K D h

C. Determining the safety stock In order to avoid the situation of out of stock by

uncertain factors, such as outburst order, we should set up a certain stock to deal with it, and that is the safety stock. In the ration mobile inventory management model, the safety stock quantity sQ is:

* *s T pQ Z S T

In this formula, Z is the safety coefficient in a certain customer service level, and it can be reckoned by normal

distributing form; TS is the criterion difference of the lead

time; and pT is the lead time.

IV. THE PERIODIC INVENTORY MANAGEMENT IN MOBILE COMMERCE

As to the periodic inventory management, we should determine the order period and the maximum inventory quantity first, and check the stocks periodically, then send out the ordering invoice in terms of the demanding.

This model is very similar to the former one, except for it is periodical when inspecting the stocks. However, the principle is widely divergent. In this model, we should determine the order period T and the maximum inventory quantity maxQ first, it belongs to periodical inspection, that is, checking the stocks in every period, and then, determine the ordering quantity according to the rest stocks and the maximum inventory quantity maxQ , so that the inventory

returns to be the maximum inventory quantity maxQ .

V. THE APPLICABILITY OF THESE MODELS If we can order the necessary goods at any time, we can

use the ration mobile inventory management, and the order quantity is equal in each time. In this situation, the daily consuming quantity is stable to some extent. After determine the order point quantity, we can adopt the following method to arrange the order: Quota: that is, if the stock quantity decreased to the

order point quantity, then, send out the order. Stack: that is, divide the stock into three parts, the first

of which is the safety stock, the second is lead time stock, and the rest is the third. Consignment always is the third one. If the third part is empty, that is the order point, then, we send out order, and consign the second part. After the second is empty, the ordered stock will be ready. The first part is safety stock, usually, their quantity is stable, we just need to update the goods, for they have limitation maintain period. If the order period can not be changed, but the order

quantity can be adapted, then, we can adopt the periodic mobile inventory management model. In this situation, the daily consuming rate plays an important role in affect the order point quantity. Because the order time is periodical and stable, if the consuming rate is change, the practical stock quantity is not equal to the order point quantity, assuming the difference is q , then, we can determine the order point quantity by the following method:

Recorded the lead time, and then, check the practical stock quantity period, assume the practical stock is Q , then,

the order quantity is ( )s pQ Q Q , that is -qsQ when

q is positive, or else, that is qsQ . The ration mobile inventory management model is

applied on the premise as follows:

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H1: There is no restraint about the order. Customers can order their goods at any time from any where.

H2: Only one type of goods is ordered. As the economic order quantity model is based on single kind of goods, the model needs to be improved when it comes to the other situation.

This model can be applied in the following situation: low price and high demanding goods; the demanding is difficult to forecast but it is stable; the consuming quantity is complex for computing and the demanded goods is ubiquitous.

The periodic inventory management model can be applied in the status as follows: high price and need strict management; the demanding is unstable, but the change is periodical, the period can be examined; great changes will make large risk.

VI. CONCLUSION Mobile inventory management is a broad conception, it

is not only involves location tracking of goods, inspecting the stocks situation information, delivering the goods, paying for the order. In this paper, we limited the application of the mobile inventory management, so that we can simplify the models and make the model easy to be applied in corporations. What is more, integrating inventory management and mobile commerce can improve the customer service level to large extent undoubtedly. Such as tracking of goods may help the corporations in determining the status of the delivering goods, it will advance their service level in providing timely and accurate service to their service receivers. As a result, it will help the corporations obtain a competitive advantage. Inventory management in mobile commerce is a valuable research area, and mobile inventory management will be a trend. There is much to do in this field. It will gain potential competitive to the users.

ACKNOWLEDGMENT This work was supported by a grant from Shanghai

Municipal Education Commission key disciplines (J512-01) and research innovation program (08YS147).

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