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Decision Rules for Buffer Inventories

Author

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  • Charles P. Bonini

    (Graduate School of Industrial Administration, Carnegie Institute of Technology)

Abstract

This paper presents the derivation of decision rules for determining the amount of each item to produce and hold in inventory in a multi-product factory. Under certain conditions the rules are good approximations to optimal minimum cost solutions. The model assumes that production is determined for all the items at the beginning of the production period. It uses as a framework a decision rule for the determination of aggregate inventory; this aggregate rule is based upon the approximation of factory cost by a quadratic cost function. A total inventory cost function, based upon the aggregation of the individual item rules, is derived.

Suggested Citation

  • Charles P. Bonini, 1958. "Decision Rules for Buffer Inventories," Management Science, INFORMS, vol. 4(4), pages 457-471, July.
    • Handle: RePEc:inm:ormnsc:v:4:y:1958:i:4:p:457-471
    DOI: 10.1287/mnsc.4.4.457
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    Cited by:

    1. Nunes Amaral, Luís A & Buldyrev, Sergey V & Havlin, Shlomo & Maass, Philipp & Salinger, Michael A & Eugene Stanley, H & Stanley, Michael H.R, 1997. "Scaling behavior in economics: The problem of quantifying company growth," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 244(1), pages 1-24.

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