A Heuristic Method for SFI Policy with Increasing Power-From Demand Pattern

Astanti, Ririn Diar and Luong, Huynh Trung (2009) A Heuristic Method for SFI Policy with Increasing Power-From Demand Pattern. In: Jurnal Ilmiah Internasional terindeks SCOPUS, Semester Genap 2008/2009.

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Abstract

Sometimes the presence of shortage is economically preferable, i.e., when holding cost is significant as compared with shortage cost .In this paper, a heuristics method based on the concept of reduction cost is proposed to determine replenishment time {ti} and shortage points {si} for shortage followed by inventory (SFI) policy with increasing power form demand pattern. It is noted that SFI policy allows shortage to occur before replenishment is received. The concept of reduction cost that is introduced in this paper is easy in concept, and it is hoped that it can help practitioners to understand the trade-off between holding the inventory and allowing the demand to be shortage. In addition, in order to avoid penalty cost, the proposed heuristic method is developed in such a way that the demands over pre-established time horizon can always be met. Numerical experiments are also carried out to illustrate the performance and the applicability of the proposed method and to compare with other published result.

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