A continuous review inventory ordering policy with an expedited shipping time option
Eggleston, Daniel Maurice, Jr.
Schrady, David A.
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A continuous review policy for ordering inventory stockage items with the option of expediting the shipping time is formulated. Demand is assumed to have a Poisson distribution with a stationary demand rate. Inventory holding costs, ordering costs, shortage costs, and expediting costs are postulated. The measure of effectiveness is the minimization of a linear combination of these costs. The optimal policy is determined analytically through the use of first differences. An iterative computational procedure is recommended for obtaining the optimal order quantity, reorder point and expediting level. Analysis of the first differences indicates the conditions under which there is a solution and a simple numerical test for these conditions id developed. A numerical example is given.
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