Abstract:

Trust plays an important role in supply chains as a binder between business partners. In this paper, we examine trust at the end of a supply chain considering customer’s trust in a retailer, which depends on the retailer’s ability to meet the customer’s demand. Insufficient product availability leads to customer churn and lost revenue, while overstocking increases the retailer’s operating costs. This paper shows how replenishing warehouse stock (reorder point) affects the retailer’s profits and customer’s trust in the retailer. The paper shows how to use modelling and simulation to determine the optimal reorder point that provides the right balance between the costs of customer churn and the storage costs. A software tool was proposed to study the relationship between product availability, reorder point, a retailer’s profit, and trust in a customer population. The tool developed in NetLogo environment uses multi-agent technology. The tool allows its users to observe non-linear relationships between reorder point, profit, and trust, as well as determine the appropriate replenishment policy of the warehouse. The case study described shows how to use the tool to maximise a retailer’s profit or maximise the number of products sold. The tool and the results obtained are important for researchers dealing with customer-retailer relationships and the human factor in supply chains, as well as for decision-makers responsible for inventory policy. The tool can be used in future research on factors in supply chains, such as time, size, costs of product delivery, or customer sensitivity to positive and negative experiences.