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http://dx.doi.org/10.11627/jkise.2014.37.1.165

A Study on Periodic Review Inventory System under Stochastic Budget Constraint  

Lee, Chang-Yong (Dept. of Industrial and Systems Engineering, Kongju National University)
Lee, Dongju (Dept. of Industrial and Systems Engineering, Kongju National University)
Publication Information
Journal of Korean Society of Industrial and Systems Engineering / v.37, no.1, 2014 , pp. 165-171 More about this Journal
Abstract
We develop an optimization algorithm for a periodic review inventory system under a stochastic budget constraint. While most conventional studies on the periodic review inventory system consider a simple budget limit in terms of the inventory investment being less than a fixed budget, this study adopts more realistic assumption in that purchasing costs are paid at the time an order is arrived. Therefore, probability is employed to express the budget constraint. That is, the probability of total inventory investment to be less than budget must be greater than a certain value assuming that purchasing costs are paid at the time an order is arrived. We express the budget constraint in terms of the Lagrange multiplier and suggest a numerical method to obtain optional values of the cycle time and the safety factor to the system. We also perform the sensitivity analysis in order to investigate the dependence of important quantities on the budget constraint. We find that, as the amount of budget increases, the cycle time and the average inventory level increase, whereas the Lagrange multiplier decreases. In addition, as budget increases, the safety factor increases and reaches to a certain level. In particular, we derive the condition for the maximum safety factor.
Keywords
Periodic Review Inventory System; Supply Chain Management; Non-linear Optimization;
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Times Cited By KSCI : 1  (Citation Analysis)
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