The use of simulation to evaluate inventory models for management of hazardous material
Collins, Bobbi L.
Stroh, Gregory F.
McMasters, Alan W.
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A problem for the Navy Supply System is identifying the proper inventory model for managing a Hazardous Material Minimization Center. This thesis analyzes three recently proposed inventory models: two continuous review economic order quantity (EOQ) inventory models and a periodic review inventory model. Based on this analysis, the authors develop both a continuous review EOQ model and a periodic review model for evaluation. These models differ from the previous ones in that they comprise all of the relevant hazardous material inventory costs including extension of shelf-life. The two new models are then evaluated through the use of simulation. A base set of data was first used in simulating both models. This was then followed by four additional simulated scenarios providing sensitivity analyses of demand-related changes to each model. The thesis' analysis focuses on total variable costs as the primary tool for evaluating the models. The results in all cases were very close, suggesting that it can be left to the inventory managers as to whether to use a continuous review or periodic review model. Additional testing with actual demand data is strongly recommended before any implementation of either model.
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