Journal
INTERNATIONAL JOURNAL OF PRODUCTION ECONOMICS
Volume 121, Issue 2, Pages 353-364Publisher
ELSEVIER
DOI: 10.1016/j.ijpe.2007.02.038
Keywords
Raw material procurement; Inventory; Theory of optimal control
Categories
Funding
- Julius-Paul-Stiegler-Gedachtnis-Stiftung
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Increasing global competition and cost pressure force enterprises and supply chains to discover undetected cost-saving potentials. In particular, interfaces to the raw materials' market are a promising field for improvement. This paper presents a deterministic optimal control approach optimizing the procurement and inventory policy of all enterprise that is processing a raw material when the purchasing price, holding cost, and the demand rate fluctuate over time. Applying Pontryagin's maximum principle, the optimal policy turns Out to be of a bang-bang type involving impulse and just-in-time procurement. Numerical examples illustrate the solutions obtained and compare the optimal policy with simple replenishment strategies. (C) 2007 Elsevier B.V. All rights reserved.
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