Template-Type: ReDIF-Paper 1.0
Author-Name: Pinçe, C.
Author-Name-Last: Pinçe
Author-Name-First: Çerağ
Author-Name: Dekker, R.
Author-Name-Last: Dekker
Author-Name-First: Rommert
Author-Person: pde16
Title: An Inventory Model for Slow Moving Items Subject to Obsolescence
Abstract: In this paper, we consider a continuous review inventory system of a slow moving item for which the demand rate drops to a lower level at a pre-determined time. Inventory system is controlled according to one-for-one replenishment policy with fixed lead time. Adaptation to the lower demand rate is achieved by changing the control policy in advance and letting the demand take away the excess stocks. We show that the timing of the control policy change primarily determines the tradeoff between backordering penalties and obsolescence costs. We propose an approximate solution for the optimal time to shift to the new control policy minimizing the expected total cost during the transient period. We find that the advance policy change results in significant cost savings and the approximation yields near optimal expected total costs.
Creation-Date: 2009-11-02
File-URL: https://repub.eur.nl/pub/17197/ERS-2009-053-LIS.pdf
File-Format: application/pdf
Series: RePEc:ems:eureri
Number: ERS-2009-053-LIS
Classification-JEL: L23, M, M11, R4
Keywords: advance policy change, excess stock, installed base, inventory control, obsolescence, spare parts
Handle: RePEc:ems:eureri:17197