Performance improvement of supply chain processes by coordinated inventory and capacity management

This study discusses the opportunities and challenges for improving the performance of supply chain processes by coordinated application of inventory management and capacity management. We illustrate our approach by a supplier company in the telecommunication and automotive industry (tier 2), where a manufacturer (production facility) is located in a country with low labor costs and high worker deployment flexibility. Using process simulation, we demonstrate how the coordinated application of methods from inventory management and capacity management result in improved performance measures of both intraorganizational (costs) and interorganizational (service level) objectives.