Simultaneous Optimization of Investment in Technology Implementation and Regulatory Compliance: A Supply Chain Decision Model

Abstract

A mathematical optimization model is proposed for strategic decision-making in supply chain management (SCM). The proposed model simultaneously optimizes investments to comply with government regulations and investments in technology to improve efficiency across three performance dimensions: ordering, just-in-time (JIT), and operating efficiency. Real company data is used to test the model. This data comes from a German company. The behavior of the proposed model is analyzed by solving four scenarios under different investment strategies. Results reveal counterintuitive findings, for example, JIT efficiency does not necessarily increase when technology investment increases; in comparison compliance with government regulations can improve companies’ operational efficiencies. These results demonstrate the sensitivity of companies’ operations to the allocation of technology investment and highlight the importance of simultaneously optimizing investments in government regulations compliance, and in the implementation of new technology. The optimization model informs the decision-making process that companies follow when investing in new technology while ensuring compliance with government regulations. Therefore, the model offers practical insights and utility for both private companies and government policymakers.