Inventory theory in practice

Includes bibliographical references (pages 60-61)The economic-order--quantity (EOQ) theory is well documented in operations research literature. The effective utilization of this approach, however, is dependent upon knowing several cost factors with a high degree of accuracy. Data is available that measures these factors (cost of ordering parts, receiving and inspection costs, storage and disbursement costs) such that a usable inventory-control model can be constructed and then used for decision-making. The accuracy level is such, however, that an inventory-decision model of an extremely simple nature will produce inventory-cost efficiencies nearly as well as EOQ. The effect of shortages on the inventory control models is also explored in this paper. Actual data from several years of recent operations from a major aerospace-avionics manufacturer was used to "simulate" these models