Stock policy in case of simultaneous ordering
- 1 October 1972
- journal article
- research article
- Published by Taylor & Francis in International Journal of Production Research
- Vol. 10 (4) , 301-312
- https://doi.org/10.1080/00207547208929933
Abstract
This article deals with a stocking policy for a group of items, characterized by the fact that when one item is ordered at normal order cost a, other items of the group. when ordered simultaneously with the first, will only cost αa (< 1). In this case, the optimal order quantity Qn, fixed for normal ordering can be reduced to Qn√ α (see eqn.(2)). A simultaneous order should be placed, when the on-hand stock of another item is under its normal order level plus Qn(l — √α) or, in other cases, when it is under normal order level + Nt 2, where N is rate of consumption and t 2 connected with the time interval between ‘ normal ’ ordors. The second method is preferable over the first one when t 2≤(Qn/N) (1— √α). The maximum stock forwhich storage space has to be reserved is equal to, or smaller than, when ordering according to the ’ normal’ system. The benefit of this system, as compared with ordering items separately, may vary for most practical cases between 8% and 50% of the total relevant stock-keeping and replenishment cost, dependant on the characteristics of the items in the group. Brown (1907) discusses the same problem; but he calculates a fixed family cycle time, based on uniform consumption rates, placing orders at fixed intervals. The present study assumes that average rates of consumption can be predicted, but they may vary in a random way. The results of the Brown method are Order Quantities and Family Order spacing, whereas the method presented, gives Premature Order Levels, and Reduced Order Quantities for each item separately, based on minimum Replenishment and Storing Cost.Keywords
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