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Lead time and ordering cost reductions in budget and storage space restricted probabilistic inventory models with imperfect items

By Aref Gholami-Qadikolaei, Abolfazl Mirzazadeh and Reza Tavakkoli-Moghaddam

Abstract

Regarding today’s business environment restrictions, one of significant concern of inventory manager is to determine optimal policies of inventory/production systems under some restrictions such as budget and storage space. Therefore here, a budget constraint on total inventory investment and a maximum permissible storage space constraint are added simultaneously to a stochastic continuous review mixed backorder and lost sales inventory system. This study also assumes that the received lot may contain some defective units with a beta-binomial random variable. Two lead time demand (LTD) distribution approach are proposed in this paper, one with normally distributed demand and another with distribution free demand. For each approach, a Lagrange multiplier method is applied in order to solve the discussed constrained inventory models and a solution procedure is developed to find optimal values. This study, also, shows that the respective budget and storage space constrained inventory models to be minimized are jointly convex in the decision variables. Numerical examples are also presented to illustrate the models

Topics: Stochastic inventory system, lead time, inventory constraints, minimax distribution free procedure, imperfect items, ordering cost reduction, Lagrange multiplier method
Publisher: EDP Sciences
Year: 2014
DOI identifier: 10.1051/ro/2014031
OAI identifier: oai:edpsciences.org:dkey/10.1051/ro/2014031
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