Purchase-Inventory Decision Models for Inflationary Conditions

Abstract

This paper develops two deterministic models for helping purchasing and materials managers in calculating economic replenishment order sizes under two specific situations. Each of these situations (questions) is frequently faced by practicing managers under current inflationary conditions. The two specific situations are: (1) one chance to place an optimum reorder before a step increase in purchase cost; and (2) optimum size of the next reorder considering that any other future reorder will be subject to a constant rate of inflation. For each of these two situations a derivation of the model in presented, and then the usage of each derivation is illustrated in detail with a typical real-world numerical example.