Inventory optimization factoring in deferred order payments and obtaining revenue delays at rental storage
MAGAZINE №6 (95) December 2019
AUTHORS BRODETSKIY G.L., SHIDLOVSKIY I.G.
CATEGORY Inventory management Optimization and mathematical modelling
ABSTRACT
The article presents a special modification of the EOQ-formula for the task of minimizing inventory management costs, for the model with rental storage, taking into account the specifics of the supply process. Modifications of special EOQ formulas for systems of the specified type were made directly for models important in the format of the corresponding business. These are systems for which a special concept of effective deliveries is introduced, when the specified delays for outgoing cash flows make it possible to pay for the order and the corresponding costs of the supply chain from the proceeds at the re-order interval. It will give managers the opportunity to find the optimal inventory management strategy if it is necessary to take into account the combined impact of a number of factors affecting decision-making procedures. We are talking about the need to consider the following factors: 1) the time value of money when cash flows of the analyzed supply chain are modeled; 2) the time delay granted to pay for the value of the delivered order; 3) pre-negotiated allowable for the duration of possible delays in the receipt of revenue from goods sold. The purpose of the article is to draw the attention of managers to existing (and still not used) opportunities to improve the efficiency of inventory management systems by taking into account these factors for a simulated supply chain and provide the appropriate tool as part of the task. The developed approach to inventory optimization while minimizing the costs of the supply chain, significantly will modify the EOQ – formula format to determine the size of the order. The optimal supply volumes taking into account the indicated modification, will become significantly smaller (in comparison with the traditional recommendations of the theory), which will favorably affect the value of working capital, the amount of capital frozen in stocks of goods, and the profitability of the supply chain itself. Formed restrictions on the allowable delay in revenue will determine the fulfillment of the conditions for the effectiveness of supply established in this article. In addition, the application of the developed model is presented on the example of a practical situation.
Keywords: inventory management time value of money deferred order payments revenue delay vehicle capacity vehicle cargo capacity
EOQ Working Capital Profitability Considering the Delay of Cash Flows and Storage Renting
MAGAZINE №4(87) August 2018
AUTHORS SHIDLOVSKIY I. G.
CATEGORY Inventory management Optimization and mathematical modelling
ABSTRACT
Optimization procedures of modern supply chains often require the consideration of a number of special factors that must reflect simulated cash flows so that the solutions found meet academic requirements in inventory management. The article evaluates the profitability of deliveries for the modified EOQ-model, in the format of which it will be possible to envisage the impact of the following factors. 1) The previously agreed possibility of deferring payment for an order. 2) The concept of the time value of money in the analysis of the cash flows of the simulated supply chain. 3) For incoming payments it is necessary to take into account that the proceeds from the sold goods will arrive with a predetermined delay (from the moment of its realization time). 4) The payment of storage costs is realized in the form of leasing the corresponding places in the warehouse, and with a delay for a specified time in relation to the middle of the reordering interval (in contrast to the traditional theory positions in the format of classical EOQ-models of inventory management).
In the case of such models, the existence of an estimate for the cost-effectiveness of the cash flows of the simulated supply chain will make it possible to use the new modified EOQ formulas taking into account the abovementioned factors. This will allow to optimize the reserves taking into account the time value of money in accordance with the requirements of financial analysis and financial mathematics. The research was carried out in relation to important for business situations of efficient supply, when the specified deferrals for payment of an order allow you to pay it out of the proceeds at the re-order intervals. Therefore, in order to simulate such processes, a necessary and sufficient condition has also been established in the paper, that must be imposed on the duration of such a delay in order to ensure the possibility of the specified payment of the order from the proceeds. The modification of such conditions is presented if, during optimization, it is necessary to take into account the need for payments from the revenue for payment of storage costs, as well as the required additional deductions related to maintaining the business processes. The features of supply optimization procedures are illustrated on the basis of numerical simulation results.
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EOQ-formula Modification at Storage Renting with Account to Payment Delays
MAGAZINE №2(85) April 2018
AUTHORS
CATEGORY Optimization and mathematical modelling Inventory management
ABSTRACT
The article presents a special modification of the EOQ-formula for a diversified EOQ-model of inventory management with account to specifics of lot deliveries. It will allow managers to determine the optimal parameters of the inventory management strategy if it is required to take into account the following features: 1) the possibility of order payment deferral; 2) time value of money at cashflow modelling 3) incomes specifics, when the proceeds come with a delay 4) specificity of storage costs payment (in form of rent or by the occupied storage space). In addition, the article specifies some options related to the possibility of using such a formula if it is necessary to additionally take into account: a) the restriction on the allowable length of the delay in payment of goods, so that the point of receipt of the proceeds did not exceed the corresponding reorder interval duration (on average); b) the vehicle capacity. The presented research materials on optimization of supplies will allow managers to estimate the effect of permissible delays in order payments, delays in receipt of proceeds, and the factor of vehicle capacity on the parameters of the optimal strategy of inventory management. The procedures of EOQ formula modification for inventory management systems are performed in relation to interesting and business-relevant models of this type that correspond to efficient deliveries, where these delays allow to make order payments from revenue at reordering intervals.
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Diversified Optimization of the Supply Strategy Parameters with a Possibility of Vehicles Selecting with Account of Their Cargo Capacity
MAGAZINE №5 (82) October 2017
AUTHORS GERAMI V.D., KOLIK A.V., SHIDLOVSKIY I.G.
CATEGORY Optimization and mathematical modelling Inventory management
ABSTRACT
A new improved algorithm to optimize the parameters of a diversified supply strategy considering the transportation features for the EOQ-models is proposed. When optimizing decisions it will allow for the first time to take into account the following attributes of the simulated supply chain: 1) cargo capacity of the vehicles used; 2) a possibility of selecting their types when delivering goods; 3) the format of paying storage costs (rent or paying only for occupied places at the warehouse); 4) expediency of deliveries using several vehicles if there are discounts on the cost of such deliveries; 5) factor of time value of money taking into account the efficiency of cash flows of the supply chain itself; 6) assessment of the expected return on the working capital of the simulated supply chain; 7) specificity of such a profitability indicator taking into account the utilization of the cargo capacity of the vehicles used at the deliveries. This algorithm was developed with reference to special EOQ-models. Namely, it relates to a class of models interesting and important for business when profit can be made at each reorder interval. The models in question are those where profit during the reordering interval can be used both to cover part of the costs at that interval and to make payment of the next delivery. Therefore, the format of the algorithm will consider necessary and sufficient conditions fulfillment of which allows to ensure the possibility of these payments from the profit during the supply chain operation.
Keywords:
Features of Multinomenclature Deliveries Optimization Taking into Account the Vehicles Choice Ability and Their Cargo Capacity
MAGAZINE №4 (81) August 2017
AUTHORS SHIDLOVSKIY I.G.
CATEGORY Optimization and mathematical modelling Inventory management
ABSTRACT
Both the block diagram and the methodological recommendations for the use of the new improved algorithm for optimizing the parameters of the multinomenclature supply strategy taking into account the features of transport support in the format of EOQ models are presented for the first time. The procedures for optimizing the supply strategy for the simulated situation for the first time illustrate their features and specifics, with allowing factoring in the important attributes of the supply chain operation. In particular, they include the factor of cargo capacity of used vehicles, as well as the choice of vehicle types for the orders supply. The factor of profitability, in turn, requires taking the conditions for the expediency of deliveries using several vehicles at once (at discounts on the cost of such deliveries) into account when optimizing. At the same time, the time value of money requires an adequate assessment of the effectiveness of cash flows of the supply chain itself (in particular, taking into account the specificity of the indicator of the return on working capital, depending on the loading of vehicles for the order delivery). The corresponding recommendations are illustrated by the example of EOQ-models of the special type. We are talking about models in which a special efficiency of supply is assumed a priori: the profit will be received at each delivery of goods. At the same time, the proceeds from the delivery can be used both to cover part of the costs for such delivery, and to pay for the delivery of the next order. Accordingly, it is illustrated how in the format of the optimization algorithm it is necessary to take into account the conditions, the fulfillment of which allows to ensure the possibility of making such payments from the proceeds. For the first time drawn attention to the possibility of using the methods of choice at many criteria in situations where the indicators of minimized costs in the analyzed alternatives among themselves slightly differ.
Keywords:
The Special Aspect the EOQ-Model Efficiency with Renting Storage Places and Factoring in the Load Carrying Capacity
MAGAZINE №2 (79) April 2017
AUTHORS GERAMI V.D., KOLIK A.V., SHIDLOVSKIY I.G.
CATEGORY Optimization and mathematical modelling Inventory management
ABSTRACT
The article discusses the special class of EOQ models which are relevant to numerous practical applications. The models of this type take into account the vehicle capacity used for goods delivery, as well as the costs of goods warehousing in the form of warehouse slots rent payments. Models also take into account that a current consignment sales revenue partially covers the regular supply purchase costs. This will not only make profit on each reorder interval, but also increase the working capital profitability. These factors, which are not counted in most traditional EOQ models, have a significant impact on the effectiveness of actual supply chains of various types. As applied to parameters of the described EOQ model the article sets out the conditions which would allow the possibility of payment based on revenues of the relevant supply chains, taking into account the working capital. To take into account the various practical approaches to optimizing the systems of the specified type the general and special cases are considered, taking into account the time value of money and without it correspondingly. Defining the conditions mentioned above allows to allocate a specified class of EOQ inventory management models, and also provides the opportunity to implement the optimization procedures for specified types of models considering both the vehicle capacity and the time value of money. The developed models adequacy, as well as the convenience and simplicity of their use for specific supply chains are illustrated by the practical examples and calculations.
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To the question of integration of material and financial flows in the supple chain
MAGAZINE №2 (61) April 2014
AUTHOR LUKINSKIY V.S., BOBKOVA V.M., BOBKOV A.V.
CATEGORY Inventory management Optimization and economic-mathematical modeling Logistics integration and coordination
ABSTRACT
The article presents an approach to the integrated management of material and financial flows in the supply chain, taking into account the time factor and the actual conditions of economic relations chain participants. Proposed optimization model income flow for the different modes of payment of costs between the chain members.
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