A two-stage method to determine parameters of ( R , Q ) inventory policy with storage capacity for a single item and multiple items

This paper presents a method for determining parameters of (R, Q) policy for a single-item inventory system under limited storage space, and for multiple items sharing storage space, that minimise the total cost. A two-stage method is developed, consisting of bootstrap-iterative method to find an initial solution without considering storage capacity, and a hybrid between cyclic coordinate method and solution evaluation using simulation to find the final solution under limited storage space. Numerical examples to demonstrate the method and computational experiments to evaluate the method's effectiveness under various scenarios are provided. In the single item experiment, effects of lead time, storage capacity, item movement, demand variability, and unit over-storage cost on the total cost savings from the proposed method are investigated. In the multiple item experiments, effects of the method, storage space sharing, storage capacity, and item package sizes on the cost savings are examined.