A comment on and correction to the holding cost expression in the determination of safety stock. (English) Zbl 0713.90026
Summary: The authors consider a reorder point inventory system with stochastic lead time and argue that in the standard approach the holding costs are overestimated because for a part of the time when a shortage occurs and there is no safety stock on hand, holding costs are computed for this portion of the time. In the note the authors derive the expression for the overestimation and the size of overestimation is numerically demonstrated.
MSC:
| 90B05 | Inventory, storage, reservoirs |
References:
| [1] | Dilworth J.B., Production and Operations Management, 2. ed. (1983) |
| [2] | Freidman M.F., European Journal of Operational Research 17 pp 125– (1984) · Zbl 0554.90030 · doi:10.1016/0377-2217(84)90016-X |
| [3] | Levin I.R., Quantitative Approaches to Management, 6. ed. (1986) |
| [4] | Liberatore M., Operations Research 27 (2) pp 391– (1978) · Zbl 0394.90030 · doi:10.1287/opre.27.2.391 |
| [5] | McLeavy D.W., Production Planning and Inventory Control (1985) |
| [6] | Wagner H.M., Principles of Operations Research, 2. ed. (1975) |
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