Premium
A Note on the Effect of Sudden Obsolescence on the Optimal Lot Size
Author(s) -
Masters James M.
Publication year - 1991
Publication title -
decision sciences
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.238
H-Index - 108
eISSN - 1540-5915
pISSN - 0011-7315
DOI - 10.1111/j.1540-5915.1991.tb01915.x
Subject(s) - obsolescence , element (criminal law) , inventory management , computer science , operations research , operations management , actuarial science , economics , business , mathematics , marketing , political science , law
In most management situations, the decision to hold inventory involves some element of obsolescence risk The traditional approach to this problem, in both theory and practice, is to incorporate obsolescence costs in the inventory holding cost. This note explores this issue and demonstrates that the traditional approach is appropriate for items subject to sudden obsolescence; that is, for items with demand lifetimes that are exponentially distributed.