Trade-off between capacity invested and inventory needed

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21 Citations (Scopus)

Abstract

A multi-item capacitated make-to-order production system with considerable demand fluctuations is discussed. The relationship between the available capacity and the inventory needed to meet customer requirements with a pre-defined service level is modeled. Furthermore, the total cost for both capacity and inventory is minimized and it is shown that, assuming negligible change-over times, the double of the surplus inventory cost has to be equal to the excess capacity cost to ensure minimum total cost.

Original languageEnglish
Pages (from-to)118-133
Number of pages16
JournalEuropean Journal of Operational Research
Volume203
Issue number1
DOIs
Publication statusPublished - 16 May 2010

Keywords

  • Capacity
  • Excess capacity
  • Inventory
  • Service level
  • Surplus inventory
  • Utilization

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