The Economic Stockage Model
Abstract
An economic stockage model is formulated which determines a stockage policy to be used in generating a stockage list of items which satisfy selected supply support objectives at least cost. The policy is in the form of addition- retention levels which minimize the discounted cost over a large number of periods. An item is added to the stockage list if its demand frequency in a period is at least equal to the addition level; it is removed if the demand frequency is less than the retention level. No action is taken for demand frequency lying between the two levels. The model assumes that the mean demand frequency of an item is unknown but designated as a prior distribution. Potential items for a stockage list are stratified into an 11 x 11 array of demand classes and extended price classes based on past history. The model finds an addition-retention pair for each extended price class. Aggregate statistics of the stratified items are used to project demand accommodation and stockage list size when using the stockage policy comprised of these 11 pairs. Input cost parameters may be varied to find policies which satisfy the supply support objectives. The economic stockage model is used to find which items qualify for removal for economic reasons from a Korean stockage list generated by a demand criteria model.
Document Details
- Document Type
- Technical Report
- Publication Date
- Jun 01, 1971
- Accession Number
- AD0727694
Entities
People
- Alan J. Kaplan
- Donald Orr