Method of Calculating Inventory Management Parameters for a Model with a Fixed Interval Between Orders Considering Deficit Costs

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MAGAZINE №5(88) October 2018


CATEGORY Inventory management Optimization and mathematical modelling



This paper is devoted to the development of formal procedures for calculating inventory management parameters for a model with a fixed interval between orders. The urgency of transition from informal methods of regulation of insurance stocks to formal economically justified procedures for calculating their planned values is shown. The article presents an analysis of the concept of "logistics service" in the context of its use in determining safety stock value. The main approaches to determine the target safety stock value depending on the level of logistics service are considered. Difficulties in determining the dependence of logistics service level and financial performance are widely known. In this regard, it is proposed to use the equation of total costs of replenishment and maintenance of reserves, including deficit costs, as a basis for determining the parameters of inventory management based on cost minimization. In this case, the service level is treated as a derived value that corresponds to the minimum total cost condition. A method for determining the parameters of inventory management for a model with a fixed period is developed. The algorithm of calculations is tested on an example.

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