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A study on the cost of operational complexity in customer–supplier systems

Authors
Journal
International Journal of Production Economics
0925-5273
Publisher
Elsevier
Publication Date
Volume
106
Issue
1
Identifiers
DOI: 10.1016/j.ijpe.2006.06.004
Keywords
  • Complexity
  • Entropy
  • Operational Cost
  • Simulation
  • Supply Chain

Abstract

Abstract This paper reports on the application of the operational complexity index [Frizelle, G., Woodcock, E., 1995. Measuring complexity as an aid to developing operational complexity. International Journal of Operations and Production Management 15(5), 26–39]. The aim is to address what is the relationship between costs and the complexity index. The investigation carried out measurements on two types of supplier–customer systems in the UK. One is make-to-stock with low product variety but high volume, while the second is make-to-order with high variety but low volume. The research found some evidence that inventory costs are associated with operational complexity. Moreover, while the index is generic to both case studies, there seemed to be a direct link between the index value and cost only in the make-to-stock case.

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