The Optimal Inventory Policy of Production Management


The traditional Economic Production Quantity (EPQ) assumes that the replenishments are instantaneous and the relevant cost only consists of setup cost, stock-holding cost of the finished goods and the purchasing cost of raw materials. As a manager of a manufactory, there is a problem that must be taken into consideration. If the establishment buys all of the raw materials at the beginning, the stock-holding cost for the raw materials should be accounted into the relevant cost. The main purpose of this paper will add the stock-holding cost of raw materials to the EPQ model. Base on this new modified EPQ model, two more useful models are established. One of the new models contains the reusable raw materials instead of the raw materials. The other one considers the stock-holding cost of the raw materials and the imperfect-quality items are considered. We present the optimal cycle length from each of these three models.

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S. Su and S. Lin, "The Optimal Inventory Policy of Production Management," Engineering, Vol. 5 No. 5A, 2013, pp. 9-13. doi: 10.4236/eng.2013.55A002.

Conflicts of Interest

The authors declare no conflicts of interest.


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