Practical inventory replenishment policies for a linear trend in demand followed by a period of steady demand.

Abstract

Inventory policies are considered for the situation of a deterministic linear trend in demand followed by a period of constant demand: an idealised form of a common situation in spares provisioning. An analytic solution is derived and its practical shortcomings discussed. The performance of practical inventory policies for this situation are compared and a policy based on the well known economic batch quantity, suitably modified for linear trend, is shown to give small cost penalties when compared to the analytic solution. The good performance of the policy based on the economic batch quantity is maintained, even when used on examples which simulate situations where the parameters of demand are not known exactly. Indeed the method is then superior to all others tried, including the optimal analytic method.