Determining the optimal order quantity with compound Erlang demand under \((T, Q)\) policy
type: Item
instance of: scholarly article
title: Determining the optimal order quantity with compound Erlang demand under \((T, Q)\) policy
zbMATH Open document ID: 1427.90015
DOI: 10.1155/2018/6085342
author: Kwok Leung Tam
author: Yingzi Bao
author: Jialing Lu
author: Ai-Ping Jiang
published in: Mathematical Problems in Engineering
publication date: 2019-02-08T00:00:00Z
review text: Summary: Management of electric equipment has a direct impact on companies' performance and profitability. Considering the critical role that electric power materials play in supporting maintenance operations and preventing equipment failure, it is essential to maintain an inventory to a reasonable level. However, a majority of these electric power materials exhibit an intermittent demand pattern characterized by random arrivals interspersed with time periods with no demand at all. These characteristics cause additional difficulty for companies in managing these electric power material inventories. In response to the above problem, this paper, based on the electric power material demand data of Shanghai Electric Power Company, develops a new method to determine the optimal order quantity \(Q^\ast\) in a cost-oriented periodic review \((T, Q)\) system, whereby unsatisfied demands are backordered and demand follows a compound Erlang distribution. \(Q^\ast\) corresponds to the value of \(Q\) that gives the minimum expected total inventory holding and backordering cost. Subsequently, an empirical investigation is conducted to compare this method with the Newsvendor model. Results verify its superiority in cost savings. Ultimately, considering the complicated calculation and low efficiency of that algorithm, this paper proposes an approximation and a heuristic algorithm which have a higher level of utility in a real industrial context. The approximation algorithm simplifies the calculation process by reducing iterative times while the heuristic algorithm achieves it by generalizing the relationship between the optimal order quantity \(Q^\ast\) and mean demand interarrival rate \(\lambda \).
Mathematics Subject Classification ID: 90B05
zbMATH DE Number: 7019236
MaRDI profile type: Publication
full work available at URL: https://doi.org/10.1155/2018/6085342
OpenAlex ID: W2885865595
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description: scientific article; zbMATH DE number 7019236