A Simulation Analysis of Ordering Policies under Inflationary Conditions

Abstract

In today′s competitive global economy, every business can benefit from managing its operations in a cost‐efficient manner. Managing materials should be no exception and the effect of inflation on ordering policies for purchased materials and supplies should be carefully analysed. It is very likely that a business can place itself in an advantageous position by changing its ordering policies in response to unfavourable economic conditions in its future operating environment. Presents a total cost model and, through simulation analysis, shows that inflationary conditions do affect lot sizes. Also shows that there are instances where lot sizes stay stable before changing again in response to increase in inflationary rates.