Inventory Optimization using a Renewal Model for SalesPaulhus, Mark (1998) Inventory Optimization using a Renewal Model for Sales. Canadian Industrial Problem Solving Workshops > 2nd IPSW [Calgary 1/6/1998 - 5/6/1998]. Full text available as:
Abstract/SummaryAny optimization requires a realistic and simple model to predict future sales. The problem presenter had suggested that sales might arrive according to a Poisson distribution. We suggest that the company look at renewal theory for models of future sales orders. They have some very distinct advantages. They are powerful and easy to use, in fact the Poisson distribution is a special case. Renewal models are flexible enough to incorporate a variety of characteristics, such as clustering or regularity, upward or downward drift, and mean reversion. Also, some arguments can be made to justify the renewal models based on financial intuition. A realistic (albeit naive) problem is set up which has an analytic solution and other solution methods are discussed.
Problem StatementYear to year, there are wide fluctuations in the demand of airplane orders at Boeing. This causes massive lay-offs and hirings which has very high cost. The problem is to devise a financial strategy to deal with these fluctuations so as to maximize the long term profit of the company. Archive Staff Only: edit this record |
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