A Multiproduct Inventory System with Interactive Set-Up Costs

Fred Andres and Hamilton Emmons
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Fred Andres: Bell Telphone Laboratories, Incorporated, Holmdel, New Jersey
Hamilton Emmons: Case Western Reserve University

Management Science, 1975, vol. 21, issue 9, 1055-1063

Abstract: We present a branch and bound algorithm for finding the optimal ordering policy for a multiproduct inventory system with deterministic demand, infinite horizon, and no backlogging. Ordering costs are assumed to include a separate set-up cost for each product ordered, but with a fixed savings each time all products are simultaneously ordered. Holding costs accrue at a constant rate per unit of each product. We first restrict our search to policies of a certain type, and then prove several theorems which lead to an efficient algorithm. For the two-product case, a special algorithm is developed to give more precise results than earlier authors.

Date: 1975
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