• Journal of Korean Society of Industrial and Systems Engineering
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• v.31 no.2
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• pp.43-50
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• 2008

In this paper we suggest the methods that compute the total inventory cost based on EOQ and the total inventory cost based on OMMIP. The total inventory cost consists of purchasing cost, ordering cost, inventory holding cost, stockout cost and so on. This papers also proposes the method that decides optimum order quantity as the order amount to minimize the total inventory cost with comparison of EOQ total inventory cost and OMMIP total inventory cost according to inventory holding cost as a fraction of unit cost.

• International Journal of Advanced Culture Technology
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• v.9 no.3
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• pp.271-276
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• 2021

In this paper we analyze the effect of the credit period on inventory policy under trade credit with ordering cost including a fixed cost and freight cost, where the freight cost has a quantity discount. For marketing purposes, some supplier offers credit period to his buyer to stimulate the demand for the product he produces. The delay in payments during the credit period has the effect of reducing the buyer's capital opportunity cost. It is also assumed that the buyer pays the freight cost for the order and hence, the ordering cost consists of a fixed ordering cost and a variable freight cost which depends on the order quantity. As a result, the possibilities of trade credit and discounts on freight costs are expected to play an important role in the buyer's inventory policy. Based on the economic order quantity inventory model, we analyze how the buyer can determine the optimal inventory policy and we examine the effect of the length of credit period on the buyer's inventory policy.

• Journal of Korean Society of Industrial and Systems Engineering
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• v.35 no.4
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• pp.211-218
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• 2012

We analyzed the effect of inventory pooling on the system where multiple depot was used to replenish retailers and where inventories are kept only on the depots. Inventory pooling consists of inventory integration and inventory exchange. We used simulation for checking the cost saving effect of reducing the number of depot (Inventory Integration) for the case when inventories kept on every depots are commonly used for all retailers when certain depot have stock out for their retailer assigned to them (Inventory Exchange) with the constraint of service level. Simulation on wide range of parameter settings results show that cost saving effect from inventory integration diminishes when transportation cost between depot and retailers or stock out cost, or retailer number increases. The effect becomes stronger when the demands on retailers have bigger variance or average. Also the results show that the cost saving effect from inventory exchange becomes stronger on the same situation when inventory integration effect becomes stronger.

• Journal of Korean Society of Industrial and Systems Engineering
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• v.40 no.4
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• pp.105-111
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• 2017

Vendor Managed Inventory is a well-known vendor-retailer coordination approach in supply chain management where the vendor manages inventory of the retailer and determines the order interval and order quantity for the retailer. To consider practical situation, the upper limit of inventory for the retailer is set. If the inventory level for the retailer exceeds the upper limit, then the penalty cost is charged to the retailer. Furthermore, maximum allowable inventory level is set for the vendor to prevent the vendor from keeping much inventory. Single-vendor multi-retailer supply chain model with upper limit of inventory for vendor and retailers is studied. All the retailers' are assumed to have the common cycle time, and a vendor manages retailers' inventory and replenishes products. The mathematical formulation is introduced to minimize the total cost including the penalty cost violating the upper limit of inventory for retailers with the constraint of maximum allowable inventory level. The solution procedure based on Karush-Kuhn-Tucker (KKT) conditions is derived. KKT conditions are often applied to find an optimal solution of nonlinear programming problem with constraints. An illustrative example is used to show the application of the proposed solution procedure. Furthermore, sensitivity analysis is done to find out the relationship between maximum allowable inventory level and other values such as order quantity, the number of shipment, vendor's cost, retailer's cost, and total cost. As maximum allowable inventory level decreases, the number of shipment decreases but total cost increases. Order quantity has the trend of decline and is affected by the number of shipment.

• Proceedings of the Korean Operations and Management Science Society Conference
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• 1999.04a
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• pp.426-426
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• 1999

;There are many sources of uncertainty in a typical production and inventory system. There is uncertainty as to how many items customers will demand during the next day, week, month, or year. There is uncertainty about delivery times of the product. Uncertainty exacts a toll from management in a variety of ways. A spurt in a demand or a delay in production may lead to stockouts, with the potential for lost revenue and customer dissatisfaction. Firms typically hold inventory to provide protection against uncertainty. A cushion of inventory on hand allows management to face unexpected demands or delays in delivery with a reduced chance of incurring a stockout. The proposed strategies are used for the design of a probabilistic inventory system. In the traditional approach to the design of an inventory system, the goal is to find the best setting of various inventory control policy parameters such as the re-order level, review period, order quantity, etc. which would minimize the total inventory cost. The goals of the analysis need to be defined, so that robustness becomes an important design criterion. Moreover, one has to conceptualize and identify appropriate noise variables. There are two main goals for the inventory policy design. One is to minimize the average inventory cost and the stockouts. The other is to the variability for the average inventory cost and the stockouts The total average inventory cost is the sum of three components: the ordering cost, the holding cost, and the shortage costs. The shortage costs include the cost of the lost sales, cost of loss of goodwill, cost of customer dissatisfaction, etc. The noise factors for this design problem are identified to be: the mean demand rate and the mean lead time. Both the demand and the lead time are assumed to be normal random variables. Thus robustness for this inventory system is interpreted as insensitivity of the average inventory cost and the stockout to uncontrollable fluctuations in the mean demand rate and mean lead time. To make this inventory system for robustness, the concept of utility theory will be used. Utility theory is an analytical method for making a decision concerning an action to take, given a set of multiple criteria upon which the decision is to be based. Utility theory is appropriate for design having different scale such as demand rate and lead time since utility theory represents different scale across decision making attributes with zero to one ranks, higher preference modeled with a higher rank. Using utility theory, three design strategies, such as distance strategy, response strategy, and priority-based strategy. for the robust inventory system will be developed.loped.

• IE interfaces
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• v.13 no.4
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• pp.584-590
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• 2000

In this paper, we analyze the inventory and inspect cost of small-to-medium-sized enterprises which are getting orders from large enterprises using JIT(just in time) system. So far, we have not found the good inventory and inspect cost formula for the small-to-medium-sized enterprises. In this paper, we first survey the inventory and inspect strategy and cost formula of the small-to-medium-sized enterprises in this country. We are trying to mathematical modelling of several cases depending on the inventory and inspect strategy of large enterprises. We suggest inventory and inspect several cost formula by using the method minimizing the total cost of the small-to-medium-sized enterprises. We also give some numerical examples for your understanding.

• Journal of Korean Society of Industrial and Systems Engineering
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• v.38 no.3
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• pp.136-148
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• 2015

We analyzed the effect of three different types of inventory systems for saving the total cost using simulation on the system where multiple depots and many retailers disperse on the limited area. Three types of inventory systems are single echelon system with inventory exchange and two-echelon system and the variant two-echelon system. Variant two echelon system is the two-echelon system where the inventory transshipmentsare allowed on every two stage inventory echelons. Inventories kept on every retailer are commonly used for all retailers when certain retailer has stock-out. And when all retailers are stock-out, inventories kept on every depot are commonly used for the retailers whose assigned depots are stock-out. These all three systems are simulated with the constraint of service level on wide range of parameter settings. Simulation results show that cost saving effect appear clear for single echelon system and two-echelon system when shortage cost portion and transportation cost portion becomes large respectively irrespective of depot number. Variant two echelon system seems to be superior to two other systems when transportationcost portion becomes very small. But this superiority is not proved in terms of statistics. So we may conclude that the variant two echelon system may be useless with the higher administrative efforts due to frequent inventory exchange. Also we note that the traditional two echelon system becomes inferior to two other systems in terms of statistics when service level becomes high or when demand variance becomes very large. And inventory integration effect that cost becomes saved when depot number decrease, diminishes when transportation cost or stock-out cost increases irrespective of inventory systems.

• Journal of the Korean Operations Research and Management Science Society
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• v.35 no.4
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• pp.33-53
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• 2010

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.

• Journal of Korean Institute of Industrial Engineers
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• v.34 no.4
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• pp.425-432
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• 2008

While the Vendor-Managed Inventory(VMI) is a convenient inventory replenishment policy for the customer company, the supplier usually bears the burden of higher inventory and urgent shipments to avoid shortage. Recently some manufacturers begin to fix the production schedule for the next few days (such as three days). Utilizing that information can improve the efficiency of the VMI. In this study, we present a myopic optimization model using a mixed inter programming; and a heuristics algorithm. We compare the performance of the two proposed methods with the existing (s, S) reorder policy. We consider the total cost as the sum of transportation cost and inventory cost at the customer's site. Numerical tests indicate that the two proposed methods significantly reduce the total cost over the (s, S) policy.

• Journal of the military operations research society of Korea
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• v.28 no.2
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• pp.1-19
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• 2002

This study shows the effect of inventory policy change from supplier-based to customer-based. We focus on the service level, cost, and information distortion of the Military Supply Chain(MSC) with System Dynamics. We design MSC model according to field practician interviews by using Vensim. The simulation makes a comparison between supply-based inventory policy performances and order-based inventory policy performances. In order to evaluate the MSC performances, we measure the accumulation of backlog(service level), supply chain cost, and order percentage overshoot(information distortion). The results show that 1) changing inventory policy from supplier-based to end customer order-based gets a good customer service, reduces MSC cost, and prevents information distortion, 2) changing inventory policy from supplier-based to immediate customer order-based reduces a small amount of MSC cost and deteriorates customer service, and 3) supply level is main factor for MSC performances improvement. This study implicates the policy change makes a improvement of MSC performance without introducing information system.