An inventory model for slow moving items subject to obsolescence
AbstractIn this paper, we consider a continuous review inventory system of a slow moving item for which the demand rate drops to a lower level at a known future time instance. The inventory system is controlled according to a one-for-one replenishment policy with a fixed lead time. Adapting to lower demand is achieved by changing the control policy in advance and letting the demand take away the excess stocks. We show that the timing of the control policy change primarily determines the tradeoff between backordering penalties and obsolescence costs. We propose an approximate solution for the optimal time to shift to the new control policy minimizing the expected total cost during the transient period. We find that the advance policy change results in significant cost savings and the approximation yields near optimal expected total costs.
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Bibliographic InfoArticle provided by Elsevier in its journal European Journal of Operational Research.
Volume (Year): 213 (2011)
Issue (Month): 1 (August)
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Web page: http://www.elsevier.com/locate/eor
Inventory control Spare parts Obsolescence Advance policy change Excess stock Installed base;
Other versions of this item:
- PinÃ§e, C. & Dekker, R., 2009. "An Inventory Model for Slow Moving Items Subject to Obsolescence," Research Paper ERS-2009-053-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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