Consumption-Driven Finite Capacity Inventory Planning and Production Control

Consumption driven finite capacity multi independent item inventory planning problem is studied.Four models are generated to solve the problem to minimize the total cost of inventory carrying, ordering and backordering.The first model reflects the classic (s, Q) policy.Model 2 has a feature of dynamic order quantity which enables system to increase or decrease the amount of items released as production orders.Models 3 and 4 both have the features of dynamic order quantities and dynamic reorder points.Dynamic reorder point is used to allow a production order to be released before reorder point violation occurs with respect to the vulnerability of backlog.In addition system is protected from overproduction and excessive inventory built by limitation parameters for r and Q.As a result, significant amounts of backlogs are prevented and total cost reductions are obtained by model-4 in highly variable demand environments.