Periodic inventory model with reduced setup cost under service level constraint


Abstract


The underlying goal of JIT philosophy is to eliminate waste, which is possible only through certain measures such as reducing the lead time, crashing of the setup cost, improving the service level etc. All these measures are achievable through an extra investment. The present study investigates the effect of crashing of the lead time and setup cost in periodic review inventory model, where the demand during the protection interval follows the normal distribution under the service level constraint. Numerical example is presented to illustrate the results of the proposed model along with the sensitivity analysis.

DOI Code: 10.1285/i20705948v4n2p111

Keywords: Inventory; Setup cost; crashing cost; Service level; Lead-time

References


Ben-Daya, M., and Raouf A. (1994).Inventory models involving lead-time as decision variable. Journal of the Operational Research Society, 45, 579-582.

Cheng, T.L., Huang, C.K., and Chen, K.C. (2004). Inventory Model involving lead-time and setup cost as decision variables. Journal of statistics and management systems, 7, 131-141.

Chu, P., Yang, K.L., and Chen, P.S. (2005). Improved inventory models with service level and lead time. Computers & Operations Research, 32, 2, 285-296.

Chuang, B.R., Ouyang, L.Y., and Chuang, K.W. (2004). A note on periodic review inventory model with controllable setup cost and lead time. Computers and Operations Research, 31, 549-561.

Hadley, G., and Whitin, T. (1963). Analysis of Inventory Systems. Prentice Hall’, Englewood Cliffs, NJ.

Jha, J.K., and Shanker, K. (2009). Two-echelon supply chain inventory model with controllable lead time and service level constraint. Computers & Industrial Engineering, 57, 3, 1096-1104.

Kim, K.L., Hayya, J.C., and Hong, J.D. (1992). Setup reduction in economic production quantity model. Decision Sciences, 23, 500-508.

Lee, W.C., Wu, J.W., and Hsu, J.W. (2006). Computational algorithm for inventory model with a service level constraint, lead time demand with the mixture of distributions and controllable negative exponential backorder rate. Applied Mathematics and Computation, 175, 2, 1125-1138.

Liang, S.K., Chu, P., and Yang, K.L. (2008). Improved periodic review inventory model involving lead-time with crashing components and service level. International Journal of Systems Science, 39, 4, 421-426.

Liao, C. J., and Shyu, C. H. (1991). An analytical determination of lead-time with normal demand. International Journal of Operations and Production Management, 11, 72-78.

Montgomery, D. C., Bazaraa, M. S., and Keswani, A. I. (1973). Inventory models with a mixture of backorders and lost sales. Naval Research Logistics, 20, 255-263.

Moon, and Choi, S. (1998). A note on lead-time and distributional assumptions in continuous review inventory review models. Computers and Operations Research, 25, 1007-1012.

Nori, V.S., and Sarker, B.R. (1996). Cyclic scheduling for a multi-product, single facility production system operating under a just-in-time production systems. Journal of Operational Research Society, 47, 930-935.

Ouyang, L. Y., and Chuang, B. R. (1998). A minimax distribution free procedure for periodic review inventory model involving variable lead-time. International Journal of Information and Management Sciences, 9, 4, 25-35.

Ouyang, L.Y., and Chuang, B.R., (2000). A periodic review inventory model involving variable lead time with a service level constraint. International Journal of Systems Science, 31, 10, 1209-1215.

Ouyang, L.Y., and Wu, K. S. (1997). Mixture inventory model involving variable lead-time with a service level constraint. Computers and Operations Research, 24, 875-882.

Ouyang, L.Y., Chuang, B.R., and Chang, H.C. (2002). Setup cost and lead time reductions on stochastic inventory models with a service level constraint. Journal of the Operations Research Society of Japan, 45, 2, 113-122.

Pan, C. H., and Hsiao, Y. C. (2001). Inventory models with back-order discounts and variable lead-time. International Journal of Systems Science, 32, 925-929.

Pan, C.H., and Hsiao, Y.C. (2005). Integrated inventory models with controllable lead time and backorder discount considerations. International Journal of Production Economics, 93-94, 387-397.

Porteus, E.L. (1985). Investing in reduced setups in the EOQ model. Management Science, 31, 998-1010.

Sarker, B.R., and Coates, E.R. (1997). Manufacturing setup cost reduction under variable lead times and finite opportunities for investment. International Journal of Production Economics, 49, 237 -247.

Silver, E. A., and Peterson, R. (1985), Decision Systems for Inventory Management and Production Planning, New York: Wiley.

Tersine, R. J. (1982), Principles of Inventory and Materials Management, Amsterdam, North Holland.

Trevino, J., Hurley, B.J., and Friedrich, W. (1993). A mathematical model for the economic justification of setup time reduction. International Journal of Production Research, 31, 191-202.

Wu, J. W., and Tsai, H. Y. (2001). Mixture inventory model with back orders and lost sales for variable lead time demand with the mixtures of normal distribution. International Journal of Systems Science, 32, 259-268.

Ben-Daya, M., and Raouf A. (1994).Inventory models involving lead-time as decision variable. Journal of the Operational Research Society, 45, 579-582. Cheng, T.L., Huang, C.K., and Chen, K.C. (2004). Inventory Model involving lead-time and setup cost as decision variables. Journal of statistics and management systems, 7, 131-141. Chu, P., Yang, K.L., and Chen, P.S. (2005). Improved inventory models with service level and lead time. Computers & Operations Research, 32, 2, 285-296. Chuang, B.R., Ouyang, L.Y., and Chuang, K.W. (2004). A note on periodic review inventory model with controllable setup cost and lead time. Computers and Operations Research, 31, 549-561. Hadley, G., and Whitin, T. (1963). Analysis of Inventory Systems. Prentice Hall’, Englewood Cliffs, NJ. Jha, J.K., and Shanker, K. (2009). Two-echelon supply chain inventory model with controllable lead time and service level constraint. Computers & Industrial Engineering, 57, 3, 1096-1104. Kim, K.L., Hayya, J.C., and Hong, J.D. (1992). Setup reduction in economic production quantity model. Decision Sciences, 23, 500-508. Lee, W.C., Wu, J.W., and Hsu, J.W. (2006). Computational algorithm for inventory model with a service level constraint, lead time demand with the mixture of distributions and controllable negative exponential backorder rate. Applied Mathematics and Computation, 175, 2, 1125-1138. Liang, S.K., Chu, P., and Yang, K.L. (2008). Improved periodic review inventory model involving lead-time with crashing components and service level. International Journal of Systems Science, 39, 4, 421-426. Liao, C. J., and Shyu, C. H. (1991). An analytical determination of lead-time with normal demand. International Journal of Operations and Production Management, 11, 72-78. Montgomery, D. C., Bazaraa, M. S., and Keswani, A. I. (1973). Inventory models with a mixture of backorders and lost sales. Naval Research Logistics, 20, 255-263. Moon, and Choi, S. (1998). A note on lead-time and distributional assumptions in continuous review inventory review models. Computers and Operations Research, 25, 1007-1012. Nori, V.S., and Sarker, B.R. (1996). Cyclic scheduling for a multi-product, single facility production system operating under a just-in-time production systems. Journal of Operational Research Society, 47, 930-935. Ouyang, L. Y., and Chuang, B. R. (1998). A minimax distribution free procedure for periodic review inventory model involving variable lead-time. International Journal of Information and Management Sciences, 9, 4, 25-35. Ouyang, L.Y., and Chuang, B.R., (2000). A periodic review inventory model involving variable lead time with a service level constraint. International Journal of Systems Science, 31, 10, 1209-1215. Ouyang, L.Y., and Wu, K. S. (1997). Mixture inventory model involving variable lead-time with a service level constraint. Computers and Operations Research, 24, 875-882. Ouyang, L.Y., Chuang, B.R., and Chang, H.C. (2002). Setup cost and lead time reductions on stochastic inventory models with a service level constraint. Journal of the Operations Research Society of Japan, 45, 2, 113-122. Pan, C. H., and Hsiao, Y. C. (2001). Inventory models with back-order discounts and variable lead-time. International Journal of Systems Science, 32, 925-929. Pan, C.H., and Hsiao, Y.C. (2005). Integrated inventory models with controllable lead time and backorder discount considerations. International Journal of Production Economics, 93-94, 387-397. Porteus, E.L. (1985). Investing in reduced setups in the EOQ model. Management Science, 31, 998-1010. Sarker, B.R., and Coates, E.R. (1997). Manufacturing setup cost reduction under variable lead times and finite opportunities for investment. International Journal of Production Economics, 49, 237 -247. Silver, E. A., and Peterson, R. (1985), Decision Systems for Inventory Management and Production Planning, New York: Wiley. Tersine, R. J. (1982), Principles of Inventory and Materials Management, Amsterdam, North Holland. Trevino, J., Hurley, B.J., and Friedrich, W. (1993). A mathematical model for the economic justification of setup time reduction. International Journal of Production Research, 31, 191-202. Wu, J. W., and Tsai, H. Y. (2001). Mixture inventory model with back orders and lost sales for variable lead time demand with the mixtures of normal distribution. International Journal of Systems Science, 32, 259-268.

Ben-Daya, M., and Raouf A. (1994).Inventory models involving lead-time as decision variable. Journal of the Operational Research Society, 45, 579-582.


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