Inventory Control Case Study

Great Essays
In Industrial engineering, inventory problem perhaps is the most interesting and researched topic of production and operations management. It is important since it provides flexibility to manage production lines, industrial plants and maximizing service to customers. The success of an enterprise is absolutely tied up with inventory capacity and its proper management.
Inventory control and its optimal solution is concerned with achieving a balance between two opposing objectives: minimizing the cost of holding inventory, and maximizing service to customers. The company can minimize Inventory costs by maintaining zero inventories. However, customer service may suffer, and customers may decide to take their needs elsewhere. This has a cost, which
…show more content…
They employ Iterated Local Search (ILS) and Simulated Annealing (SA) to minimize the annual total cost. Torres et al. [15] presented a new supplier selection model to determine safety stocks based on the supplier delivery reliability using differential calculus. Guchhait et al. [16] established damageable items production inventory models with variable demands and inventory costs depends on reliability in an imperfect production process. using Euler–Lagrange function based on variational calculus and Newton–Raphson method to optimize the model and finding maximum total profit. Paul et al. [17] introduced a real time recovery plan from production disruptions either single or series of disruptions for a two-stage and single item batch production inventory system with reliability considerations. Using a pattern search and genetic algorithm to maximize the total profit function, which show that the pattern search is better. Lin and Srivastava [18] developed a new two-warehouse inventory model with quantity discounts and maintenance actions under an imperfect production process. The objective is to minimize the total expected cost per unit time. An efficient algorithm was developed to help the manager in accurately and quickly determining the order policy. Taleizadeh et al. [19] developed economic production quantity (EPQ) model with random defective …show more content…
[26] proposed an economic order quantity (EOQ) for items with imperfect quality similar to Salameh and Jaber [3] a screening process is adopted considering the errors in inspection and the defective items are sold at a discounted price. The objective is to maximize the total profit and the model is solved analytically. Roy et al. [27] present an EOQ model where imperfect quality items take place in each ordered lot and partial back ordering is done. The objective is to determine the optimum values of lot size and shortage period, which maximizes the expected average profit. Shah and Soni [28] proposed a multi-objective production inventory model with backorder for fuzzy random demand under flexibility and reliability of production process, the objective is to maximize the total expected profit incurred in each production cycle which is optimized using a multi-objective genetic algorithm (MOGA). Tripathy and Pattnaik [29] developed a model in a more general way to the work of Cheng [2], Tripathy et al. [30], Tripathy and Pattnaik [31], and assuming that demand exceeds supply, but the unit cost of production is inversely related to process reliability and directly related to the demand rate by a power function. Numerical example gives that this situation makes saving in the unit production cost than proposed by Tripathy et al. [30], and Sensitivity analysis, are performed to his model to find the effect of the constants of the power function on the unit cost of

Related Documents

  • Decent Essays

    The report indicates framework to incorporate promotion decisions into the data-mining process, formulate the profit maximization problem as an optimization problem, and propose a heuristic search solution to discover the right products to promote. 1. This method is highly effective and applicable for the real supermarket data to help them achieve higher profits to a marketing campaign 1. This method only is considered the short-term associations between products by looking at associations at the transaction level. A dynamic marketing-operations interface model of new product updates (Sale, R. S., Mesak, H. I., & Inman, R. A.,…

    • 1677 Words
    • 7 Pages
    Decent Essays
  • Great Essays

    Full-Cost Price model is a model that has been developed against the modern economics model of Average-Cost-Pricing. In this model, price is set based on the average-cost principle. Price=AVC+GPM=AC. Where AVC is the average variable cost and GPM is the gross profit margin. The average-cost-pricing is aimed at making sure that the firm achieves its long-run profit maximization.…

    • 941 Words
    • 4 Pages
    Great Essays
  • Improved Essays

    In other words, marginal utility is the utility gained from the next unit of a commodity consumed. This distinction allows Jevons to show how utility can correspond to prices, which is something that cannot be shown if one relies on total utility (T, 214). In the words of Jevons, “Many commodities which are most useful to us are esteemed and desired but little” (T, 214). From this analysis, Jevons arrives at the principal of diminishing marginal utility, which states that as the quantity of a commodity consumed increases, the marginal utility of that commodity decreases (T, 214). Thus Jevons and the Marginalists are able to manipulate the measure of utility in such a way to solve economic conundrums, such as the diamond-water paradox.…

    • 997 Words
    • 4 Pages
    Improved Essays
  • Improved Essays

    Concepts of CVP (Cost Behaviour Analysis?) Contribution Margin Contribution margin (CM) is a cost accounting concept that allows a company to determine the profitability of individual products (Investopedia, 2015). In short, it is equivalent to the revenue less the total variable cost (Horngren, Datar, & Rajan). The CM per unit measures the amount of each unit sold contributes to cover fixed costs and increasing profit and also considers what happens when sales and production increase by one unit. The firm benefits from revenue equal to the selling price, but it also incurs increased costs equal to the variable cost per unit.…

    • 868 Words
    • 4 Pages
    Improved Essays
  • Improved Essays

    It is caused by the law of diminishing marginal returns. The law affects both short-run production of the company as well the cost of the production. This results in a positively-sloped supply curve for profit-maximising…

    • 1163 Words
    • 5 Pages
    Improved Essays
  • Superior Essays

    Monopolies Research Paper

    • 1269 Words
    • 6 Pages

    From there, a monopolist uses that quantity while using the corresponding value on the demand curve, the value to the buyers. This is what causes the deadweight loss, represented with a red triangle in Figure 2. This area is the total surplus that is lost due to the monopolies setting their price above the marginal cost.…

    • 1269 Words
    • 6 Pages
    Superior Essays
  • Improved Essays

    There are two methods uses(are used) to presenting(present) the income statement which is(are) the marginal costing and the absorption costing, the net profit difference will be reconciled between these two methods after the income statement is complete. Marginal and absorption costing are two different approaches to dealing with fixed manufacturing overheads and whether or not they are included in valuing inventory. The marginal cost is the total variable cost of the product, it consists of direct labour hours, direct materials and direct expenses, therefore when the production units increase, the total variable cost will increase proportionately. In other word, the marginal cost can be avoid if there are no any unit to be produced and will…

    • 735 Words
    • 3 Pages
    Improved Essays
  • Superior Essays

    The Law of Demand says that when the price of a good increases, the quantity decreases. In that instance, consumers will search for a substitute for that good. A substitute is a good that can be used as an alternative to a previously purchased good that has undergone a significant price increase (Colander, 2013). A firm 's ability to produce a substitute good when necessary is the basis of the Law of Supply. On the other hand, a complement is a good that is used along with another good (Colander, 2013).…

    • 1045 Words
    • 5 Pages
    Superior Essays
  • Improved Essays

    So firms can deter deviation only by threatening to set Cournout quantities, which are above monopoly quantities, during a period of a price below agreed one. The equilibrium of the model is that firms want to maximise their profits at the collusive quantities,…

    • 1159 Words
    • 5 Pages
    Improved Essays
  • Improved Essays

    The basic formula for calculating the elasticity of a product is to divide the percentage change in quantity demanded by the percentage change in price. When the value of elasticity is greater than one percent, it indicates that the demand for the good is sensitive to price changes. Economists see these types of products as more elastic due to their highly responsive nature. If the value of elasticity is less than one percent, however, it indicates that the demand for the good is not as sensitive to its price. Economists…

    • 1586 Words
    • 7 Pages
    Improved Essays