Single Order Inventory Replenishment Policy for the System Having Multiple Substitutable Inventory Items
Article Sidebar
Main Article Content
Abstract
The research discusses the single order inventory replenishment policy for a system consisting of three inventory items with substitutability. The leftovers of lower-cost inventory items can be either used to satisfy those demands occurred from the shortage of higher-cost inventory items with a specified ratio or sold at their salvage value. In order to determine the proper order quantity for each inventory item, the method based on the concept of mathematical solving on a Monte Carlo simulation model is proposed. This can be done by modeling the system on the Microsoft Excel platform and, with the objective function of maximizing the expected system profit, applying the solver function to determine a good solution. For the performance evaluation, 120 experimental problems are randomly generated considering two main factors, salvage value (2 levels) and substitution ratio (2 levels), with 30 replications for each treatment combination. The solution obtained from the proposed method is compared with the solution yielded from the traditional benefit analysis method, which is to independently determine the single order quantity of each inventory item without the consideration of substitution opportunity. According to the study result, in comparison to the benefit analysis method, the proposed method provides a larger expected profit for all 120 experimental problems. Moreover, the main influences of salvage value and substitution affect the percentage difference in profit between the proposed method and the benefit analysis approach. Here, the percentage difference in profit increases at the lower levels of both factors.
Article Details
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
Article Accepting Policy
The editorial board of Thai-Nichi Institute of Technology is pleased to receive articles from lecturers and experts in the fields of engineering and technology written in Thai or English. The academic work submitted for publication must not be published in any other publication before and must not be under consideration of other journal submissions. Therefore, those interested in participating in the dissemination of work and knowledge can submit their article to the editorial board for further submission to the screening committee to consider publishing in the journal. The articles that can be published include solely research articles. Interested persons can prepare their articles by reviewing recommendations for article authors.
Copyright infringement is solely the responsibility of the author(s) of the article. Articles that have been published must be screened and reviewed for quality from qualified experts approved by the editorial board.
The text that appears within each article published in this research journal is a personal opinion of each author, nothing related to Thai-Nichi Institute of Technology, and other faculty members in the institution in any way. Responsibilities and accuracy for the content of each article are owned by each author. If there is any mistake, each author will be responsible for his/her own article(s).
The editorial board reserves the right not to bring any content, views or comments of articles in the Journal of Thai-Nichi Institute of Technology to publish before receiving permission from the authorized author(s) in writing. The published work is the copyright of the Journal of Thai-Nichi Institute of Technology.
References
W. Supithak, Inventory Planning (Theory and Simulation). Bangkok, Thailand: Chulalongkorn University Press (in Thai), 2022.
F. W. Harris, “How many parts to make at once,” Oper. Res., vol. 38, no. 6, pp. 947–950, 1990.
A. Andriolo, D. Battini, R. W. Grubbström, A. Persona, and F. Sgarbossa, “A century of evolution from Harris’s basic lot size model: Survey and research agenda,” Int. J. Prod. Econ., vol. 155, pp. 16–38, Sep. 2014.
S. Agarwal, “Economic order quantity model : A review,” VSRD Int. J. Mech., Civil, Automobile Prod. Eng., vol. 4, no. 12, pp. 233–236, Dec. 2014.
S. M. Lam and D. S. Wong, “A fuzzy mathematical model for the joint economic lot size problem with multiple price breaks,” Eur. J. Oper. Res., vol. 95, no. 3, pp. 611–622, 1996.
A. K. Maiti, A. K. Bhunia, and M. Maiti, “An application of real-coded genetic algorithm (RCGA) for mixed integer non-linear programming in two-storage multi-item inventory model with discount policy,” Appl. Math. Comput., vol. 183, no. 2, pp. 903–915, 2006.
S. Panda, S. Saha, and M. Basu, “An EOQ model for perishable products with discounted selling price and stock dependent demand,” Cent. Eur. J. Oper. Res., vol. 17, pp. 31–53, 2008.
P. K. Tripathy, M. Pattnaik, and P. Tripathy, “Optimal promotion and replenishment policies for profit maximization model under lost units,” American J. Oper. Res., vol. 2, no. 2, pp. 260–265, 2012.
M. K. Salameh, M. Y. Jaber, and N. Noueihed, “Effect of deteriorating items on the instantaneous replenishment model,” Prod. Planning Control, vol. 10, no. 2, pp. 175–180, 1999.
M. Pattnaik, “Deteriorated Economic Order Quantity (EOQ) model with variable ordering cost,” (in Thai), Thai. Stat., vol. 12, no. 1, pp. 83–95, Jan. 2014.
H. M. Wagner and T. W. Whitin, “Dynamic version of the economic lot size model,” Manage. Sci., vol. 5, no. 1, pp. 89–96, 1958.
E. A. Silver and H. C. Meal, “A heuristic for selecting lot size quantities for the case of a deterministic time-varying demand rate and discrete opportunities for replenishment,” Prod. Inventory Manage., vol. 14, no. 2, pp. 64–74, 1973.
R. J. Tersine, “Single order quantity,” in Principles of Inventory and Materials Management, 4th ed. Englewood Cliffs, NJ, USA: Prentice-Hall, 1994, ch 7, pp. 312–335.
D. Waters, “Models for Uncertain Demand,” in Inventory Control and Management, 2nd ed. England, U.K.: John Wiley & Sons, 2003, ch 5, pp. 147–192.
Y. Qin, R. Wang, A. J. Vakharia, Y. Chen, and M. M.H. Seref, “The newsvendor problem: Review and directions for future research,” Eur. J. Oper. Res., vol. 213, no. 2 pp. 361–374, 2011.
N. C. Petruzzi and M. Dada, “Pricing and the newsvendor problem: A review with extensions,” Oper. Res., vol. 47, no. 2, pp. 183–194, 1999.
N. Turken, Y. Tan, A. J. Vakharia, L. Wang, R. Wang, and A. Yenipazarli, “The multi-product newsvendor problem: Review, extensions, and directions for future research,” in Handbook of Newsvendor Problems, T.-M. Choi, Ed., New York, NY, USA: Springer, 2012, ch. 1, pp. 3–39.
M. Khouja, A. Mehrez, and G. Rabinowitz, “A two-item newsboy problem with substitutability,” Int. J. Prod. Econ., vol. 44, no. 3, pp. 267–275, 1996.