A Linear Approach to the Dynamic Inventory Problem
The decision aspects of inventory management revolve around striking some balance between the costs of change and the costs of failing to change. However, in any but the simplest cases of economic order quantities it is difficult to specify precisely how one cost interacts with the other: by how much exactly do additional set-ups reduce the total cost of inventories or wasted production, or the total penalties for delayed deliveries or lost sales--supposing that units are taken out of inventory by some demand function and added to inventories by some production function? This paper analyzes the interaction of the various costs and provides relatively simple optimizing formulae assuming that, mainly, a) demand is reasonably well approximated by a linear function of time; b) production proceeds at a constant rate between one set-up and the next; c) demand and production overlap in time such that the total quantity produced in any one lot interval equals the total quantity consumed in that interval (a unit being consumed as soon as it is ready, though the run from which it comes is not yet completed); and if d) inventories are permitted; that is, surplus production is storable and backorders are acceptable, though both are more or less costly.
Volume (Year): 12 (1966)
Issue (Month): 7 (March)
|Contact details of provider:|| Postal: 7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA|
Web page: http://www.informs.org/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:12:y:1966:i:7:p:530-540. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.