Determining the Optimal Order Quantity with Compound Erlang Demand under (T,Q) Policy

Aiping Jiang, Kwok Leung Tam, Yingzi Bao and Jialing Lu

Mathematical Problems in Engineering, 2018, vol. 2018, 1-23

Abstract:

Management of electric equipment has a direct impact on companies’ performance and profitability. Considering the critical role that electric power materials play in supporting maintenance operations and preventing equipment failure, it is essential to maintain an inventory to a reasonable level. However, a majority of these electric power materials exhibit an intermittent demand pattern characterized by random arrivals interspersed with time periods with no demand at all. These characteristics cause additional difficulty for companies in managing these electric power material inventories. In response to the above problem, this paper, based on the electric power material demand data of Shanghai Electric Power Company, develops a new method to determine the optimal order quantity in a cost-oriented periodic review system, whereby unsatisfied demands are backordered and demand follows a compound Erlang distribution. corresponds to the value of that gives the minimum expected total inventory holding and backordering cost. Subsequently, an empirical investigation is conducted to compare this method with the Newsvendor model. Results verify its superiority in cost savings. Ultimately, considering the complicated calculation and low efficiency of that algorithm, this paper proposes an approximation and a heuristic algorithm which have a higher level of utility in a real industrial context. The approximation algorithm simplifies the calculation process by reducing iterative times while the heuristic algorithm achieves it by generalizing the relationship between the optimal order quantity and mean demand interarrival rate .

Date: 2018
References: Add references at CitEc
Citations:

Downloads: (external link)
http://downloads.hindawi.com/journals/MPE/2018/6085342.pdf (application/pdf)
http://downloads.hindawi.com/journals/MPE/2018/6085342.xml (text/xml)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hin:jnlmpe:6085342

DOI: 10.1155/2018/6085342

Access Statistics for this article

More articles in Mathematical Problems in Engineering from Hindawi
Bibliographic data for series maintained by Mohamed Abdelhakeem ().