Determination of Optimal Supply When Demand Is a Sum of Components

Abstract

Among the various inventory systems our method is used to find the optimal supply size. To find the optimal supply size taking in to consideration the aspects like inventory holding cost per unit, cost of shortage per unit etc., In many situation the demand taken to be a random variable. The total demand is in turn a sum of three random variables namely (i) demand due to consumers (ii) demand due to the supply of the product to sister concerns or companies. (iii) Demand due to replacement of defective items that are not accepted and hence exchanged for new units Under these assumptions the optimal supply size is derived.