Joint Replenishment in Multi-Item Inventory Systems

Abstract

A multi-item inventory system is considered which has the property that, for each single item, a reorder policy using the E.O.Q. formula would be appropriate. Holding costs are linear, and fixed ordering costs are assumed to be composed of a major set-up cost reflecting the pure fact of placing an order, and a sum of minor set-up costs corresponding to the items included in the order. If it is desirable to form a certain number of groups of items where all items of one group share the same order cycle, it is shown that there is always an optimal grouping in which items are arranged in increasing order of their ratio of yearly holding costs and minor set-up costs.