A mixed 0‐1 integer programming for inventory model

Abstract

PurposeThis paper seeks to construct a model for inventory management for multiple periods. The model considers not only the usual parameters, but also price quantity discount, storage and batch size constraints.Design/methodology/approachMixed 0‐1 integer programming is applied to solve the multi‐period inventory problem and to determine an appropriate inventory level for each period. The total cost of materials in the system is minimized and the optimal purchase amount in each period is determined.FindingsThe proposed model is applied in colour filter inventory management in thin film transistor‐liquid crystal display (TFT‐LCD) manufacturing because colour filter replenishment has the characteristics of price quantity discount, large product size, batch‐sized purchase and forbidden shortage in the plant. Sensitivity analysis of major parameters of the model is also performed to depict the effects of these parameters on the solutions.Practical implicationsThe proposed model can be tailored and applied to other inventory management problems.Originality/valueAlthough many mathematical models are available for inventory management, this study considers some special characteristics that might be present in real practice. TFT‐LCD manufacturing is one of the most prosperous industries in Taiwan, and colour‐filter inventory management is essential for TFT‐LCD manufacturers for achieving competitive edge. The proposed model in this study can be applied to fulfil the goal.