Journal of Korean Society of Industrial and Systems Engineering (산업경영시스템학회지)

Society of Korea Industrial and System Engineering (한국산업경영시스템학회)
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A Study on Periodic Review Inventory System under Stochastic Budget Constraint

확률적 예산 제약을 고려한 주기적 재고관리 정책에 대한 연구

  • Lee, Chang-Yong (Dept. of Industrial and Systems Engineering, Kongju National University) ;
  • Lee, Dongju (Dept. of Industrial and Systems Engineering, Kongju National University)
  • 이창용 (공주대학교 산업시스템공학과) ;
  • 이동주 (공주대학교 산업시스템공학과)
  • Received : 2014.02.28
  • Accepted : 2014.03.14
  • Published : 2014.03.31
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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.

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References

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