Dynamic mixed-item inventory control with limited capital and short-term financing

Gongbing Bi (), Lei Song () and Yalei Fei ()
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Gongbing Bi: University of Science and Technology of China
Lei Song: University of Science and Technology of China
Yalei Fei: Bank of Zhengzhou

Annals of Operations Research, 2020, vol. 284, issue 1, No 5, 99-130

Abstract: Abstract For most companies, operational decisions and financing decisions jointly affect the earnings and efficiency. Although these effects have been studied in various contexts, there is little literature on the dynamic multi-item inventory control problem, especially the case of multi-item product firms which have limited capital and cannot get easy access to external financing. A serious problem is: What are the optimal procurement strategy and financing strategy for a company with a shortage of funds? In this article, we study a dynamic mixed-item inventory control problem where a capital-constrained firm periodically purchases items from suppliers and assembles some items to meet product orders from customers. In the single period, building the traditional model to obtain three inventory strategies. When the capital is sufficient, all items are purchased. When the capital is insufficient, perishable items are purchased. When the capital is appropriate, both perishable items and part of durable items are purchased. In the multi-period, by constructing new variable value to shape two types of functions and sequences, the procurement strategies of manufacturer at different levels of value are obtained. In the financing decision-making, the manufacturer limits the financing due to the limitation of the financing interest rate, so as to further define the concept of the joint bankruptcy point.

Keywords: Mixed-item inventory; Financial constraint; Short-term financing; Dynamic programming; Optimal policy (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10479-018-3061-2

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