A principle for determining the correct capital costs of work-in-progress and inventory

Grubbström, Robert W.

doi:10.1080/00207548008919665

Cited by 93 publications

(38 citation statements)

References 3 publications

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“…As mentioned earlier, applying the Net Present Value (NPV) principle has been regarded to be superior to the Average Cost approach (AC) by several authors, for instance by Trippi and Levin (1974) and Grubbström (1980) The practical AC model has often been shown to be a good approximation of NPV, when the discount rate  is small and the holding cost parameter is interpreted as hc   , where c is unit production (or purchase) cost, cf. Beullens and Janssens (2012).…”

Section: Methodsological Developments Analysing Cash Flows Related Tomentioning

confidence: 99%

“…This is one of the most studied topics concerning the EOQ problem, so there were several interesting and relevant papers related to trade credits, extending Goyal's model in many directions, and a forerunner is found in (Grubbström 1980 In reality, a supplier is often willing to offer the purchaser a permissible delay of payments if the purchaser orders a large quantity which is greater than or equal to a predetermined quantity. If the order is less than this quantity, the purchaser must pay for the items received immediately (see Chang, Ouyang, and Teng (2003) Mahata (2011Mahata ( , 2012).…”

Section: T I D C T I D C T I Kmentioning

confidence: 99%

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A century of evolution from Harris׳s basic lot size model: Survey and research agenda

Andriolo

Battini

Grubbström

et al. 2014

International Journal of Production Economics

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169

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Determining the economic lot size has always represented one of the most important issues in production planning. This problem has long attracted the attention of researchers, and several models have been developed to meet requirements at minimum cost. In this paper we explore and discuss the evolution of these models during one hundred years of history, starting from the basic model developed by Harris in 1913, up to today. Following Harris's work, a number of researchers have devised extensions that incorporate additional considerations. The evolution of EOQ theory strongly reflects the development of industrial systems over the past century. Here we outline all the research areas faced in the past by conducting a holistic analysis of 219 selected journal papers and trying to give a comprehensive view of past work on the EOQ problem. Finally, a new research agenda is proposed and discussed.

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Section: Methodsological Developments Analysing Cash Flows Related Tomentioning

confidence: 99%

Section: T I D C T I D C T I Kmentioning

confidence: 99%

A century of evolution from Harris׳s basic lot size model: Survey and research agenda

Andriolo

Battini

Grubbström

et al. 2014

International Journal of Production Economics

Self Cite

169

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“…Grubbström (1980) was perhaps first to introduce the term. Most studies that use NPV to retrieve the capital costs, except for Porteus (1985) and Beullens et al (2013), adopt 'conventional' assumptions.…”

Section: Introductionmentioning

confidence: 99%

“…Grubbström (1980Grubbström ( , 2007 shows how capital costs can be determined for inventories and work-in-process at several stages in more complex systems of production and inventory. See also Gurnani (1983).…”

Section: Introductionmentioning

confidence: 99%

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Adapting inventory models for handling various payment structures using net present value equivalence analysis

Beullens

Janssens

2014

International Journal of Production Economics

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Classic inventory models use average cost functions. It is generally accepted that these models should account for the time value of money. They do so not by considering the timing of cash-flows, but by including opportunity costs. The Net Present Value (NPV) framework has long been used to compare these models with. We formalise NPV Equivalence Analysis (NPVEA) under various payment structures, and apply it to a few classic inventory models. While taking the linear approximation is typically part of the process to find equivalence, the essence is to disregard the parameters of a classic inventory model but instead start from cash-flow structures between firms. It is demonstrated how this leads to different plausible interpretations of, or variations to, classic inventory models, in particular for payment structures that differ from conventional assumptions. We identify situations with negative holding costs, which indicates that more features from the real world must be added into the decision model.We illustrate that in addition to capital costs, firms can enjoy capital rewards. These rewards may not always affect the firm's inventory decisions, but are in general useful for finding the impact of changes to various parameters on the firm's future profits.

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Costs and Concepts

International Series in Operations Research &Amp; Management Science

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A principle for determining the correct capital costs of work-in-progress and inventory

Cited by 93 publications

References 3 publications

A century of evolution from Harris׳s basic lot size model: Survey and research agenda

A century of evolution from Harris׳s basic lot size model: Survey and research agenda

Adapting inventory models for handling various payment structures using net present value equivalence analysis

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