Inventory Management: Modeling Real-life Supply Chains and Empirical Validity

Abstract

It is our intention to write a different overview of inventory models, from single item single echelon models to multi-item multi-echelon models, then is mostly provided in text books on Operations Management. We hope that this monograph provides complementary knowledge. Instead of starting with inventory models that are tractable from a mathematical point of view, we start from the inventory management problem and the modeling challenges to be faced. We present the economic order quantity problem from the perspective of Return On Investment instead of from a cost perspective. We show that the Newsvendor fractile emerges from virtually any model with linear holding and penalty costs. And we discuss the complexities of multi-item multi-echelon inventory systems by developing necessary and sufficient conditions operational control policies for such systems should satisfy.