Continuous Review Inventory Research Articles

Continuous Review Inventory Model under Partial Permissible Delay in Payment Policy and Capacity Constraint

Continuous Review Inventory Model under Partial Permissible Delay in Payment Policy and Capacity Constraint

Capacitated Continuous Review Inventory with Partial Backorder Under Time-Dependent Demand and Fuzzy Supply: Bi-Objective Optimization via Simulation Model

Capacitated Continuous Review Inventory with Partial Backorder Under Time-Dependent Demand and Fuzzy Supply: Bi-Objective Optimization via Simulation Model

An Integrated Model of Continuous Review Inventory and Vehicle Routing Problem with Time Windows

Item stock-out or shortage is a great issue for customer satisfaction and can be countered by providing safety stocks. This study discusses an authorized distributor of smartphone and tablet computer products in Indonesia. Currently, the company is considering a plan to take over the role of a logistics service company to reduce the total logistics costs that must be incurred by making improvements in terms of inventory management. Inventory management can also protect the company from the impact of inflation and price increases that will impose logistics costs. This study has assumed that the vehicle travel speed or travel time between two nodes is fixed. This study contributes to minimizing total logistics costs by integrating the concept of a continuous review lot size-reorder point (Q, R) inventory model with lost sales and vehicle routing problems with time windows (VRPTW). Continuous review (Q, R) inventory model with lost sales shows the retailers’ cycle demand ranges from 130 to 234 units. This condition leads to the value of the expected average annual inventory cost IDR 27.263.204.625,59. Based on the VRPTW calculation, the total distribution cost per trip is IDR 445.631.642,7. Based on the current total distribution costs, it was found that the total distribution costs were IDR 849.454.616,2, so there is a decrease in distribution costs of 47.54%. The total logistics cost that must be incurred by the company to deliver smartphone products to 10 retailers in Jakarta and its surrounding areas is IDR 27,708,836,268.29.

Simulation-Based Optimization of a Two-Echelon Continuous Review Inventory Model with Lot Size-Dependent Lead Time

This study analyzes a stochastic continuous review inventory system (Q,r) using a simulation-based optimization model. The lead time depends on lot size, unit production time, setup time, and a shop floor factor that represents moving, waiting, and lot size inspection times. A simulation-based model is proposed for optimizing order quantity (Q) and reorder point (r) that minimize the total inventory costs (holding, backlogging, and ordering costs) in a two-echelon supply chain, which consists of two identical retailers, a distributor, and a supplier. The simulation model is created with Arena software and validated using an analytical model. The model is interfaced with the OptQuest optimization tool, which is embedded in the Arena software, to search for the least cost lot sizes and reorder points. The proposed model is designed for general demand distributions that are too complex to be solved analytically. Hence, for the first time, the present study considers the stochastic inventory continuous review policy (Q,r) in a two-echelon supply chain system with lot size-dependent lead time L(Q). An experimental study is conducted, and results are provided to assess the developed model. Results show that the optimized Q and r for different distributions of daily demand are not the same even if the associated total inventory costs are close to each other.

Effects of Supply Disruption on Optimal Inventory Policy: The Case of (r,S) Continuous Review Inventory Policy

In this study, we focus on the derivation of an optimal inventory policy to help tackle the supply disruption problem. The main objective of the study is to derive an optimal inventory policy for a retailer who is facing stochastic supply disruption and stochastic demand, operating under a (r, S) continuous review policy so as to minimise the total inventory cost per time-unit. Renewal reward theorem is used to help develop the total inventory cost function which consists of order cost, time-dependent holding and shortage costs in the existence of replenishment lead time. Numerical experiments and sensitivity analyses are then conducted to illustrate the applicability of the developed inventory policy.

Continuous Review Inventory Model with Normally Distributed Fuzzy Random Variable Demand

A fuzzy random continuous review inventory model is developed in this paper in order to illustrate a means of quantifying both imprecision and stochastic uncertainty simultaneously when there is significant information (imprecise and/or otherwise) available. Here the annual customer demand is assumed to be continuous fuzzy random variable following normal distribution, because in real life inventory situations, normal distribution is most often used to quantify customer demand information. The associated probability density function of the annual demand is also taken to be fuzzy in nature. The lead-time demand is also taken to be a normally distributed continuous fuzzy random variable by connecting it to the annual demand through the length of the constant lead-time. Under these assumptions, a methodology is proposed to minimize the crisp equivalent of the expected total annual cost and determine the optimal values of the re-order point and order quantity in the process. A numerical example is also presented to illustrate the proposed model and provide managerial insights.

A Continuous Review Inventory System with Retrial Customers and Two-Stage Service

A Continuous Review Inventory System with Retrial Customers and Two-Stage Service

A Continuous Review Inventory System with Lost Sales and Emergency Orders

We analyze a continuous review lost sales inventory system with two types of orders—regular and emergency. The regular order has a stochastic lead time and is placed with the cheapest acceptable supplier. The emergency order has a deterministic lead time is placed with a local supplier who has a higher price. The emergency order is not always filled since the supplier may not have the ability to provide the order on an emergency basis at all times. This emergency order has a higher cost per item and has a known probability of being filled. The total costs for this system are compared to a system without emergency placement of orders. This paper provides managers with a tool to assess when dual sourcing is cost optimal by comparing the single sourcing and dual sourcing models.

Continuous Review Inventory Systems: Practice Problems

A problem set to review the concepts of continuous review inventory systems. These problems can be assigned for additional practice in calculating order quantities, inventories, and relevant costs. This can be used with the notes Managing Inventories: Determining Order Quantity (UVA-OM-1395) and Managing Inventories: The Reorder Point System (UVA-OM-1394). Excerpt UVA-OM-1489 Rev. Apr. 4, 2014 CONTINUOUS REVIEW INVENTORY SYSTEMS: PRACTICE PROBLEMS 1. Demand for an item is 1,661 units per year. The ordering cost is $ 20 per order. The carrying cost per year (c ´ k) is $ 5.40 per item. On average, how many orders are placed each year, if the economic order quantity (EOQ) is ordered? 2. An office orders stationery from a supplier. The cost of paper is $ 20.51 per ream. The ordering cost is $ 33 per order. The annual cost of carrying the inventory is 0.22 (22%) of the unit cost per ream. The annual demand is 22,013 reams of paper. What is the annual carrying cost of inventory, assuming that the EOQ is ordered? 3. Demand for an item is 9,434 units per year. The ordering cost is $ 21 per order. The carrying cost per year (c ´ k) is $ 18 per item. What is the optimal ordering quantity? . . .

Optimization Models for the Continuous Review Inventory System

Businesses that carry inventory as a means of responding to customer demand must decide when to place inventory orders and how much to order. A model for selecting an optimal order quantity and reorder point in the continuous review system is implemented in spreadsheet software. Historical data on period demand and lead time is processed by performing a statistical test to select a mixture distribution for lead time demand. This distribution is incorporated into an expected shortage calculation and cost model where shortages incur lost sales and/or goodwill costs. The lead time demand distribution selection is evaluated through experiments. In examples, employing an incorrect distribution leads to expenditures between one and eighteen percent higher than those experienced with the correct model. A mismatch of the backorder or lost sales model with the correct underlying assumptions leads to expenses between four and thirteen percent larger than necessary in an example problem.

A Continuous Review Inventory Model with Fuzzy Service Level Constraint and Fuzzy Random Variable Parameters

This paper presents a continuous review inventory system in the presence of fuzziness and randomness in demand and cost parameter. In the realistic situations, determination of the stock-out cost is often difficult. Instead of having stock-out cost term in the objective function, a condition on the service level is established on the model. The model is constructed as a fuzzy stochastic optimization problem, and we developed a methodology to obtain the optimal solutions such that total expected annual cost is minimized in the fuzzy sense. A numerical example is included to illustrate the proposed methodology.

Approximate Continuous Review Inventory Models with the Consideration of Purchase Dependence

Approximate Continuous Review Inventory Models with the Consideration of Purchase Dependence

An Approximation Approach for Solving a Continuous Review Inventory System Considering Service Cost

【The modular assembly system can make it possible for the variety of products to be assembled in a short lead time. In this system, necessary components are assembled to optional components tailor to customers' orders. Budget for inventory investments composed of inventory and purchasing costs are practically limited and the purchasing cost is often paid when an order is arrived. Service cost is assumed to be proportional to service level and it is included in budget constraint. We develop a heuristic procedure to find a good solution for a continuous review inventory system of the modular assembly system with a budget constraint. A regression analysis using a quadratic function based on the exponential function is applied to the cumulative density function of a normal distribution. With the regression result, an efficient heuristics is proposed by using an approximation for some complex functions that are composed of exponential functions only. A simple problem is introduced to illustrate the proposed heuristics.】

Fuzzy Continuous Review Inventory Model using ABC Multi-Criteria Classification Approach: A Single Case Study

Fuzzy Continuous Review Inventory Model using ABC Multi-Criteria Classification Approach: A Single Case Study

Analysis of Two-Commodity Continuous Review Inventory System in Supply Chain

Abstract: This paper considers a two commodity continuous review inventory system. Continuous review inventory control of a single item at a single location had been considered by many researchers in past. We extend this inventory control strategy to two-echelon system, which is a building block for serial supply chain. The inventory control system consists of two warehouse (WHi), Two Distribution Centre’s (DCi) each associated with a retailer and handling two non-identical products. A (s, S) type inventory system with Poisson demand and exponentially distributed lead times is assumed at retailer node. The items are supplied to the retailers in packs of Qi (= Si-si) items from the distribution center (DCi) which has instantaneous replenishment facility from an abundant source (manufacturer). The steady state probability distribution and the operating characteristics are obtained explicitly. The measures of system performance in the steady state are obtained. The results are illustrated with numerical examples.

Lead Time Management through Expediting in a Continuous Review Inventory System

We consider a continuous review inventory system where delivery lead times can be managed by expediting in‐transit orders shipped from the supplier. First, we propose an ordering/expediting policy and derive expressions for evaluating the operating characteristics of such systems. Second, using extensive numerical experiments, we quantify the benefits of such an expediting policy. Third, we investigate a number of managerial issues. Specifically, we analyze the impact of the number of expediting hubs and their locations along the shipment network on the performance of such systems and offer insights into the design of the shipment network. We show (i) a single expediting hub that is optimally located in a shipment network can capture the majority of cost savings achieved by a multi‐hub system, especially when expediting cost is not low or demand variability is not high; (ii) when expediting time is proportional to the time to destination, for small‐enough or large‐enough demand variations, a single expediting hub located in the middle of the shipment network can capture the majority of cost savings of an optimally located hub; and (iii) in general, hubs close to the retailer significantly drive down costs, whereas hubs close to the supplier may not offer much cost savings.

OPTIMAL CONTROL OF A FINITE-CAPACITY INVENTORY SYSTEM WITH SETUP COST AND LOST SALES

One of the most fundamental results in inventory theoryis the optimality of (s, S) policy for inventory systems withsetup cost. This result is established based on a key assumptionof infinite production/ordering capacity. Several studies haveshown that, when there is a finite production/ordering capacity,the optimal policy for the inventory system is very complicatedand indeed, only partial characterization for the optimal policyis possible. In this paper, we consider a continuous reviewinventory system with finite production/ordering capacity andsetup cost, and show that the optimal control policy for thissystem has a very simple structure. We also develop efficientalgorithms to compute the optimal control parameters.

Constrained Probabilistic Continuous Review Inventory System with Mixture Shortage and Stochastic Lead Time Demand

This paper derives the probabilistic continuous review backorders and lost sales inventory system when the order cost is a function of the order quantity. Our objective is to minimize the expected annual total cost under a restriction on the expected annual holding cost when the lead time demand follows some continuous distributions by using the Lagrangian method. Some published special cases are deduced and an illustrative numerical example with some graphs is added.

Continuous Review Inventory Model with Fuzzy Stochastic Demand and Variable Lead Time

The present study considers a continuous review inventory system for the inventory model involving fuzzy random demand, variable lead-time with backorders and lost sales. The authors first use the triangular fuzzy number count upon lead-time to construct a lead-time demand. Using credibility criterion, the expected shortages are calculated. Without loss of generality, the authors have assumed that all the observed values of the fuzzy random variable, representing the demand are triangular fuzzy numbers. Consequently, the value of total expected cost in the fuzzy sense is derived using the expected value criterion or credibility criterion. For the proposed model, the authors provide a solution to find the optimal lead-time and the optimal order quantity along with the reorder point such that the total expected cost in the fuzzy sense has a minimum value. Numerical study is also provided to illustrate the results of proposed model.

Distribution‐Free Continuous Review Inventory Model with Controllable Lead Time and Setup Cost in the Presence of a Service Level Constraint

Based on the mean and the standard deviation of lead time demand, and also taking the difficulty in measuring shortage cost into consideration, we investigate the joint decision problem of continuous review inventory in which a service level constraint should be satisfied. Under the assumption of controllable lead time and setup cost, a mathematical programming model is established. The objective function of the proposed model is the total expected annual cost and the constraint guarantees that the service level requirement can be satisfied at the worst case. Subsequently, an equivalent nonlinear programming model is derived. By constructing Lagrange function, the analysis regarding the solution procedure is conducted, and a solution algorithm is then provided. Moreover, a numerical example is introduced to illustrate the proposed model and solution algorithm. Through sensitivity analysis, some observations and managerial implications are provided.