Journal of the Korean Operations Research and Management Science Society (한국경영과학회지)

The Korean Operations Research and Management Science Society (한국경영과학회)
권호 표지

Risk-averse Inventory Model under Fluctuating Purchase Prices

구매가격 변동시 위험을 고려한 재고모형

  • 유석천 (동국대학교 서울캠퍼스 경영학부) ;
  • 박찬규 (동국대학교 서울캠퍼스 경영학부) ;
  • 정욱 (동국대학교 서울캠퍼스 경영학부)
  • Received : 2010.04.06
  • Accepted : 2010.11.19
  • Published : 2010.12.31
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Abstract

When purchase prices of a raw material fluctuate over time, the total purchasing cost is mainly affected by reordering time. Existing researches focus on deciding the right time when the demand for each period is replenished at the lowest cost. However, the decision is based on expected future prices which usually turn out to include some error. This discrepancy between expected prices and actual prices deteriorates the performance of inventory models dealing with fluctuating purchase prices. In this paper, we propose a new inventory model which incorporates not only cost but also risk into making up a replenishment schedule to meet each period's demand. For each replenishment schedule, the risk is defined to be the variance of its total cost. By introducing the risk into the objective function, the variability of the total cost can be mitigated, and eventually more stable replenishment schedule will be obtained. According to experimental results from crude oil inventory management, the proposed model showed better performance over other models in respect of variability and cost.

Keywords

References

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