Optimal Base-Stock Inventory-Management Policies of Cement Retailers under Supply-Side Disruptions

Manik Debnath, Sanat Kr. Mazumder, Md Billal Hossain, Arindam Garai () and Csaba Balint Illes
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Manik Debnath: Department of Mathematics, Indian Institute of Engineering Science and Technology, Shibpur, Kolkata 711103, India
Sanat Kr. Mazumder: Department of Mathematics, Indian Institute of Engineering Science and Technology, Shibpur, Kolkata 711103, India
Md Billal Hossain: Doctoral School of Economic and Regional Sciences, Hungarian University of Agriculture and Life Sciences, 2100 Godollo, Hungary
Arindam Garai: Department of Mathematics, Sonarpur Mahavidyalaya, Rajpur, Kolkata 700149, India
Csaba Balint Illes: Hungarian National Bank—Research Center, John Von Neumann University, 6000 Kecskemét, Hungary

Mathematics, 2023, vol. 11, issue 18, 1-34

Abstract: The current study aims to identify some optimal base-stock inventory-management policies that maximize the expected long-run profitability of cement retailers under potential supply-side disruptions. Unlike existing articles, the proposed economic order-quantity model considers periodically varying random demand rates of deteriorating items together with partially back-ordered shortages in the face of those random disruptions. This study computes the global concavity to execute the exemplary aspect for the optimal base-stock level under a slew of cost components and a fixed cycle length. Regarding the optimal pricing-related policies, this study proposes that cement retailers should stock from nearby supplier points. Unlike existing articles, we find that changes to either the unit-holding cost or the unit-lost sales cost have hardly any determining effect on the long-run profitability of retailers. When supply-side disruptions are more likely to occur during peak seasons, this study advocates for a planned capacity addition and higher base-stock levels of cement bags.

Keywords: periodic-review inventory model; base-stock policy; supply-side disruption; varying demand rate; deterioration; partial back-ordering (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2023
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