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An Analysis of a Multi-Line Re-Order System Using a Can-Order Policy

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Listed:
  • Michael J. Maher

    (Leeds University)

  • John C. Gittins

    (Cambridge University)

  • Roger W. Morgan

    (Cambridge University)

Abstract

This paper analyses an inventory system which employs a "can-order" policy. Under such a policy lines of stock are re-ordered when they run out, and at these times lines which have not run out are also re-ordered if the stock levels in particular lines are below the "can-order level." The well-known policies of independent and of joint re-orders are extreme cases of a can-order policy. Optimal values of the initial stock level and the can-order level are found, and are given in graphical form for the cases of 2 and 3 identical lines. An approximate method is described which finds these values for higher numbers of lines, and the method is shown to be a significant improvement on the two basic policies. Finally, the extension of the model to the general case, in which each line may have a separate unit holding cost and a separate sales rate, is discussed and some proposals made for optimisation.

Suggested Citation

  • Michael J. Maher & John C. Gittins & Roger W. Morgan, 1973. "An Analysis of a Multi-Line Re-Order System Using a Can-Order Policy," Management Science, INFORMS, vol. 19(7), pages 800-808, March.
    • Handle: RePEc:inm:ormnsc:v:19:y:1973:i:7:p:800-808
    DOI: 10.1287/mnsc.19.7.800
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