Solution Techniques for Inventory Replenishment Policies with Linear Demand Trend
Four inventory replenishment policies namely: Analytical, Silver-Meal Heuristic, Alternative Heuristic and Modified EBQ are compared for the case of deterministic linearly increasing demand. Using hypothetical example, for each policy, cost penalties of ordering earlier and later than optimal replenishment times are calculated. A wide range of values for slope of demand, inventory replenishment and holding costs are considered. Shortcomings of each policy is discussed. For the case of linearly decreasing demand a new policy based on Modified EBQ is developed and compared with analytical method. Within the considered wide range of values for relevant cost and demand pattern parameters, EBQ method suitably modified for linear trend has shown very good performance.
KeywordsCost Penalty Spare Part Demand Pattern Average Demand Initial Increase
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