Abstract
An extensive amount of work has been done in the area of inventory management during the past twenty-five years. So far all of the published literature mainly concerns itself with the optimization of average profit or cost/year in order to find the best operating policy. A new approach to the management of inventory is introduced in this work, where all the money transacted in a planning year is discounted back to the beginning of the year and the objective function thus obtained is optimized to determine an optimum operating policy. The continuous compounding has been used in this work for discounting purposes. In this work, the conventional inventory rate, I, has been decomposed into two parts--investment rate, i, and auxiliary inventory rate, ?ü. This was necessary to do in order to get the present worth of all the money transacted in a year. The relationship among I, i, and ?ü is established. For continuous corresponding continuous rates, r and ?ü[subscript c] are used. In this study, the demand may either be deterministic uniform, or deterministic non-uniform but it has to be continuous. The basic model develops a mathematical expression for economic order quantity under the assumptions of deterministic demand, constant usage rate, instantaneous replenishment, no constraints or quantity discounts, and constant sales price. ...
Misra, Ram Behari (1973). Optimal inventory methods - present worth and continuous compounding considered. Doctoral dissertation, Texas A&M University. Texas A&M University. Libraries. Available electronically from
https : / /hdl .handle .net /1969 .1 /DISSERTATIONS -157496.