Further Research and Extensions

Abstract

Although the economic criterion based inventory theory has been extensively researched and discussed during the past half a century, it has witnessed limited success in application. This is, in part, attributable to the use of model parameters which are usually difficult to estimate or measure. Examples of such parameters are the shortage cost and inventory carrying or holding cost. Additionally, the classic inventory theory literature is almost taciturn with regards to practical realization of these parameters. Inventory policies which are derived by optimizing objective functions that are couched in terms of profit maximization or cost minimization tend to ignore the immediate concern of the decision maker, usually at the plant or operator’s level.