Inventory management
Claudio Arbib
Università dell’Aquila __________
Part III: multiple resource types
Contents
Multiple stock management
– Different resource types regularly absorbed by the system:
formulation as integer linear programming
– Example of application
Multiple stock management
• Previous models do not allow us in general to optimize the simultaneous management of distinct stock types
• To cope with this situation one can resort to an
optimization model based on integer linear programming
• Referring to day t, let us indicate as
d it = the demand s it = the stock level
r it = the replenishment g it = the per-unit
inventory cost of
resource type i
(i = 1, …, m)
Multiple stock management
• Resources are purchased from p different magazines: let R h denote the set of resources purchased from magazine h
• Referring to day t, let us indicate as
d it = the demand s it = the stock level r it = the replenishment g it = the per-unit
inventory cost of resource type i (i = 1, …, m)
Customer
Supplier 1
Supplier p R
1R
pMultiple stock management
c o s t
amount
0 10 20 30 40 50 60kc
0hfor (k – 1) δ
h< r < k δ
h• The delivery cost depends on the delivering magazine: let c 0h be the cost borne to send up to δ h resource units from magazine h
• Referring to day t, let us indicate as
d it = the demand s it = the stock level
r it = the replenishment g it = the per-unit
inventory cost of resource type i (i = 1, …, m)
• Let
x ht = number of deliveries
from magazine h on
day t
Multiple stock management
• Referring to day t, let us indicate as
d it = the demand s it = the stock level
r it = the replenishment g it = the per-unit
inventory cost of resource type i (i = 1, …, m)
• Let
x ht = number of deliveries from magazine h on dayt
The problem reads:
min Σ c 0h Σ x ht + Σ Σ g it s it
h=1 t∈T i=1 t∈T
s i,t = s i,t–1 + r i,t–1 – d i,t ( for i = 1, …, m, t ∈ T )
Σ r it < δ h x ht
i∈R
h( for h = 1, …, p , t ∈ T ) x ht , r it , s it > 0 x ht integer
p m
Example
day 1 2 3 4 5 6 7 8 9 10 11 12
20 20 20 19 19 19 18 17 17 17 17 16 g1
10 12 12 12 12 12 14 14 14 14 15 16 g2
15 14 14 14 12 10 9 9 10 11 12 14 g3
cost
A plant is fed with 3 resource types. A forecast for the 12 days to come refers that their value is going to vary as follows
inventory cost
0 5 10 15 20 25
1 2 3 4 5 6 7 8 9 10 11 12
day
cost Risorsa 1
Risorsa 2 Risorsa 3
giorno 1 2 3 4 5 6 7 8 9 10 11 12
20 20 20 19 19 19 18 17 17 17 17 16 g1
10 12 12 12 12 12 14 14 14 14 15 16 g2
15 14 14 14 12 10 9 9 10 11 12 14 g3
costo
day 1 2 3 4 5 6 7 8 9 10 11 12
20 20 20 19 19 19 18 17 17 17 17 16 g1
10 12 12 12 12 12 14 14 14 14 15 16 g2
15 14 14 14 12 10 9 9 10 11 12 14 g3
2,0 2,1 2,1 1,8 1,0 1,2 1,6 2,2 0,3 1,0 d1
3,0 3,0 3,0 3,0 4,0 1,0 3,0 d2
2,0 2,1 2,6 4,0 1,0 5,0 d3
cost
absorption
Example
The demand of finite products over time causes the following
absorption of resources 1, 2 and 3
giorno 0 1 2 3 4 5 6 7 8 9 10 11 12
20 20 20 19 19 19 18 17 17 17 17 16 g1
10 12 12 12 12 12 14 14 14 14 15 16 g2
15 14 14 14 12 10 9 9 10 11 12 14 g3
2,0 2,1 2,1 1,8 1,0 1,2 1,6 2,2 0,3 1,0 a1
3,0 3,0 3,0 3,0 4,0 1,0 3,0 a2
2,0 2,1 2,6 4,0 1,0 5,0 a3
costo
assorbimento
day 0 1 2 3 4 5 6 7 8 9 10 11 12
20 20 20 19 19 19 18 17 17 17 17 16 g1
10 12 12 12 12 12 14 14 14 14 15 16 g2
15 14 14 14 12 10 9 9 10 11 12 14 g3
2,0 2,1 2,1 1,8 1,0 1,2 1,6 2,2 0,3 1,0 d1
3,0 3,0 3,0 3,0 4,0 1,0 3,0 d2
2,0 2,1 2,6 4,0 1,0 5,0 d3
5,0 s1
4,0 s2
2,0 s3
cost
absorption
residual stock
This is the stock level inherited from previous days
Example
The demand of finite products over time causes the following
absorption of resources 1, 2 and 3
Example
day 0 1 2 3 4 5 6 7 8 9 10 11 12
20 20 20 19 19 19 18 17 17 17 17 16 g1
10 12 12 12 12 12 14 14 14 14 15 16 g2
15 14 14 14 12 10 9 9 10 11 12 14 g3
2,0 2,1 2,1 1,8 1,0 1,2 1,6 2,2 0,3 1,0 d1
3,0 3,0 3,0 3,0 4,0 1,0 3,0 d2
2,0 2,1 2,6 4,0 1,0 5,0 d3
5,0 s1
4,0 s2
2,0 s3
400 c0A 500 c0B cost
absorption
residual stock deliveries
The demand of finite products over time causes the following absorption of resources 1, 2 and 3
Resources 1 and 2 come from magazine A, resource 3 from
magazine B. One delivery from A costs c 0A = 400€, from B
c 0B = 500€
Example
day 0 1 2 3 4 5 6 7 8 9 10 11 12
20 20 20 19 19 19 18 17 17 17 17 16 g1
10 12 12 12 12 12 14 14 14 14 15 16 g2
15 14 14 14 12 10 9 9 10 11 12 14 g3
2,0 2,1 2,1 1,8 1,0 1,2 1,6 2,2 0,3 1,0 d1
3,0 3,0 3,0 3,0 4,0 1,0 3,0 d2
2,0 2,1 2,6 4,0 1,0 5,0 d3
5,0 s1
4,0 s2
2,0 s3
400 c0A 500 c0B
20 delta1 18 delta2 cost
absorption
residual stock deliveries
capacity
The demand of finite products over time causes the following absorption of resources 1, 2 and 3
In a single delivery one can send up to 20 units (of resource
types 1 and 2) from A and up to 18 (of type 3) from B
Example
day 0 1 2 3 4 5 6 7 8 9 10 11 12
20 20 20 19 19 19 18 17 17 17 17 16 g1
10 12 12 12 12 12 14 14 14 14 15 16 g2
15 14 14 14 12 10 9 9 10 11 12 14 g3
2,0 2,1 2,1 1,8 1,0 1,2 1,6 2,2 0,3 1,0 d1
3,0 3,0 3,0 3,0 4,0 1,0 3,0 d2
2,0 2,1 2,6 4,0 1,0 5,0 d3
5,0 s1
4,0 s2
2,0 s3
r1 r2 r3
400 c0A 500 c0B
20 delta1 18 delta2 replenishment
deliveries capacity
cost
absorption
residual stock
The decision variables of the model regard, for each day,
• the deliveries from each magazine
• the stock levels and resource amounts sent
The former variables are integer, the latter real, all non-negative
Example
day 0 1 2 3 4 5 6 7 8 9 10 11 12
20 20 20 19 19 19 18 17 17 17 17 16 g1
10 12 12 12 12 12 14 14 14 14 15 16 g2
15 14 14 14 12 10 9 9 10 11 12 14 g3
2,0 2,1 2,1 1,8 1,0 1,2 1,6 2,2 0,3 1,0 d1
3,0 3,0 3,0 3,0 4,0 1,0 3,0 d2
2,0 2,1 2,6 4,0 1,0 5,0 d3
5,0 s1
4,0 s2
2,0 s3
r1 r2 r3
400 c0A 500 c0B
20 delta1 18 delta2 replenishment
deliveries capacity
cost
absorption
residual stock
The cost is obtained by summing up
• the number of deliveries multiplied by the relevant costs
• the stock levels multiplied (scalar product) by inventory costs
MATR.SOMMA.PRODOTTO(C2:N4;C8:N10) + N$14$*SOMMA(B14:M14) + N$15$*SOMMA(B15:M15) N$15$*SUM(B15:M15)
SUMPRODUCT(C2:N4;C8:N10) + N$14$*SUM(B14:M14) +
Example
day 0 1 2 3 4 5 6 7 8 9 10 11 12
20 20 20 19 19 19 18 17 17 17 17 16 g1
10 12 12 12 12 12 14 14 14 14 15 16 g2
15 14 14 14 12 10 9 9 10 11 12 14 g3
2,0 2,1 2,1 1,8 1,0 1,2 1,6 2,2 0,3 1,0 d1
3,0 3,0 3,0 3,0 4,0 1,0 3,0 d2
2,0 2,1 2,6 4,0 1,0 5,0 d3
5,0 s1
4,0 s2
2,0 s3
r1 r2 r3
400 c0A 500 c0B
5 0 0 0 0 0 0 0 0 0 0 0
4 0 0 0 0 0 0 0 0 0 0 0
2 0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0 20 delta1
0 0 0 0 0 0 0 0 0 0 0 0 18 delta2
cost
absorption
residual stock
replenishment deliveries
equilibrium capacity
Once introduced the following constraints
• equilibrium: b
i,t–1+ r
i,t–1– b
i,t= a
i,t• capacity: δ
hx
ht– Σ
Rhr
it> 0 one can solve the problem, getting
Example
day 0 1 2 3 4 5 6 7 8 9 10 11 12
20 20 20 19 19 19 18 17 17 17 17 16 g1
10 12 12 12 12 12 14 14 14 14 15 16 g2
15 14 14 14 12 10 9 9 10 11 12 14 g3
2,0 2,1 2,1 1,8 1,0 1,2 1,6 2,2 0,3 1,0 d1
3,0 3,0 3,0 3,0 4,0 1,0 3,0 d2
2,0 2,1 2,6 4,0 1,0 5,0 d3
5,0 3,0 0,9 2,8 1,0 1,0 0,0 5,1 3,5 1,3 1,3 1,0 0,0 s1 4,0 1,0 1,0 3,0 0,0 0,0 0,0 8,0 4,0 3,0 3,0 3,0 0,0 s2 2,0 2,0 0,0 0,0 0,0 12,6 10,0 10,0 10,0 6,0 5,0 5,0 0,0 s3 0,0 0,0 4,0 0,0 0,0 0,0 6,3 0,0 0,0 0,0 0,0 0,0 r1
0,0 0,0 5,0 0,0 0,0 0,0 11,0 0,0 0,0 0,0 0,0 0,0 r2 0,0 0,0 0,0 0,0 14,7 0,0 0,0 0,0 0,0 0,0 0,0 0,0 r3
0 0 1 0 0 0 1 0 0 0 0 0 400 c0A
0 0 0 0 1 0 0 0 0 0 0 0 500 c0B
2 2 2 2 0 1 1 2 2 0 0 1
3 0 3 3 0 0 3 4 1 0 0 3
0 2 0 0 2 3 0 0 4 1 0 5
0 0 11 0 0 0 3 0 0 0 0 0 20 delta1
0 0 0 0 3 0 0 0 0 0 0 0 18 delta2
replenishment deliveries
equilibrium capacity
cost 2676
absorption
residual stock
Once introduced the following constraints
• equilibrium: b
i,t–1+ r
i,t–1– b
i,t= a
i,t• capacity: δ
hx
ht– Σ
Rhr
it> 0 one can solve the problem, getting
Example
day 0 1 2 3 4 5 6 7 8 9 10 11 12
20 20 20 19 19 19 18 17 17 17 17 16 g1
10 12 12 12 12 12 14 14 14 14 15 16 g2
15 14 14 14 12 10 9 9 10 11 12 14 g3
2,0 2,1 2,1 1,8 1,0 1,2 1,6 2,2 0,3 1,0 d1
3,0 3,0 3,0 3,0 4,0 1,0 3,0 d2
2,0 2,1 2,6 4,0 1,0 5,0 d3
5,0 3,0 0,9 2,8 1,0 1,0 0,0 5,1 3,5 1,3 1,3 1,0 0,0 s1 4,0 1,0 1,0 3,0 0,0 0,0 0,0 8,0 4,0 3,0 3,0 3,0 0,0 s2 2,0 2,0 0,0 0,0 0,0 12,6 10,0 10,0 10,0 6,0 5,0 5,0 0,0 s3 0,0 0,0 4,0 0,0 0,0 0,0 6,3 0,0 0,0 0,0 0,0 0,0 r1
0,0 0,0 5,0 0,0 0,0 0,0 11,0 0,0 0,0 0,0 0,0 0,0 r2 0,0 0,0 0,0 0,0 14,7 0,0 0,0 0,0 0,0 0,0 0,0 0,0 r3
0 0 1 0 0 0 1 0 0 0 0 0 400 c0A
0 0 0 0 1 0 0 0 0 0 0 0 500 c0B
2 2 2 2 0 1 1 2 2 0 0 1
3 0 3 3 0 0 3 4 1 0 0 3
0 2 0 0 2 3 0 0 4 1 0 5
0 0 11 0 0 0 3 0 0 0 0 0 20 delta1
0 0 0 0 3 0 0 0 0 0 0 0 18 delta2
replenishment deliveries
equilibrium capacity
cost 2676
absorption
residual stock
The chart obtained helps understanding daily operation in terms of
resource absorptions, residual stock monitoring and replenishment
Example
0 5 10 15 20 25
0 1 2 3 4 5 6 7 8 9 10 11
resource 1 resource 2 resource 3
The chart obtained helps understanding daily operation in terms of resource absorption, residual stock monitoring and replenishment
0 4 8 12 16 20
0 1 2 3 4 5 6 7 8 9 10 11
resource 1 resource 2 resource 3