Inventory Management for Multiple Products

by Sarita Malhan

Submitted : Spring 2013

This problem focused on inventory management for a specific company that wished to minimize the cost of their ordering process for two separate products. The problem statement has several given constraints, which include the price per unit of each product, the fixed charge for each order, and the cost to annually store each product.

In order to determine the number of ordering cycles, it is necessary to set an equation that is to be optimized. This is done by creating two separate equations, one for the number of units required per year and one for the annual cost of the unit, and plugging the first equation into the second. Since the goal is to minimize the cost, the derivative of this new equation is taken and set equal to zero. The value of the number of cycles per year can be determined. In order to determine the number of units per cycle, simply plug this number into the original equation.

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