Inventory Model With Variable Holding Cost To Accomodate Planned Shortage (Study Case at CV. Yopan Ceramics)
Abstract
Inventory has become the biggest problem and needs to get extra attention. The
inventory problem is associated with products which are stored in the storage for
longer term and the higher cost needed to maintain it. In the real problem, the storage
cost/holding cost is variable dependent to storage time used and to be increasing
function of the time spent in the storage. Two types of variable holding cost are
retroactive holding cost and incremental holding cost. Those type created with the
purpose of determining optimal quantity ,cycle time, andminimum inventory cost
which includes of demand, order cost, demand elasticity to inventory, and holding
cost. Based on common real-life condition that sometimes the demand is greater than
the inventory level. This condition caused the inventory shortage and anticipated by
doing backorder before zero stock inventory in order to meet customer satisfaction.
This paper presents the inventory model with variable holding cost using a simple
algorithm to determine optimal solution which includes minimizing total inventoy cost
and also to accomodate planned shortage to determine the shortage cost which
includes backorder cost and administrative backorder cost.
Keywords: variable holding cost, shortage, optimum solution, backorder, total
inventory cost
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- Industrial Engineering [2225]