Trade-off between capacity invested and inventory needed

Herbert Jodlbauer and Klaus Altendorfer

European Journal of Operational Research, 2010, vol. 203, issue 1, 118-133

Abstract: A multi-item capacitated make-to-order production system with considerable demand fluctuations is discussed. The relationship between the available capacity and the inventory needed to meet customer requirements with a pre-defined service level is modeled. Furthermore, the total cost for both capacity and inventory is minimized and it is shown that, assuming negligible change-over times, the double of the surplus inventory cost has to be equal to the excess capacity cost to ensure minimum total cost.

Keywords: Capacity; Inventory; Service; level; Excess; capacity; Surplus; inventory; Utilization (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:203:y:2010:i:1:p:118-133

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