Inventory Management for Minimum Cost

David P. Herron
Additional contact information
David P. Herron: FMC Corporation, Santa Clara, California

Management Science, 1967, vol. 14, issue 4, B219-B235

Abstract: One of the most popular types of inveatoiy management is the (Q, r) system, in which a quantity Q of an item is reordered whenever the inventory position reaches the reorder point r. A number of packaged computer programs are available for this system. However, these programs seldom give the minimum-cost values of Q and r, since they usually employ the Wilson Economic Order Quantity. Use of the Wilson EOQ may result in substantial excess costs, particularly for items of high annual cash flow. This article describes graphical and algebraic methods suitable for computer application to determine accurately the minimum-cost values of Q and r, employing either dollar stockout penalties or specified service levels. Both the single-item and aggregate inventory cases are included. The methods described can readily be implied on most computers and can result in significant cost savings.

Date: 1967
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.14.4.B219 (application/pdf)

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:inm:ormnsc:v:14:y:1967:i:4:p:b219-b235

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().