Inventory Planning for Substitutable Materials.

Abstract

This research studies the utilization pattern of the alternative material used for automobile, Lead Wheel Weights, by determining the utilization pattern of the alternative material that yields the lowest unit cost per each usage in order to determine the order policy. The methods include the Fixed-order Policy with the determined material utilization pattern, the Fixed-order Policy with non-determined material utilization pattern, the non-fixed order Policy with determined material utilization pattern and the non-fixed order Policy with non-determined material utilization pattern. The indicators include the Ending Inventory, Fill Rate and Total Cost of Inventory. The research has indicated that the Fixed-order Policy with the determined material utilization pattern yields 13.99% reduction of inventory holding cost with the fill rate of 89.5% and 5.5% reduction of the total cost. The Fixed-order Policy with non-determined material utilization pattern yields 15.40% reduction of inventory holding cost with the rate of 91.5% and 9.1% reduction of the total cost. The non-fixed order policy with the determined pattern of material utilization yields 12.49% reduction of inventory holding cost with the fill rate of 96% and 10.05% reduction of total cost. And, the non-fixed order policy with non-determined material utilization pattern yields 10.92% reduction of inventory holding cost with the fill rate of 94.6% and 8.5% reduction of total cost. Therefore; the non-fixed order policy with the determined material utilization pattern can best meet the objectives.