Research On The Capacitated Multi-product Inventory Control And Outsourcing

The company holds inventories to address the uncertainty of customers in the operational management. Yet the limited warehouse space or ordering fund may not meet the storing requirement. Therefore, the manager should make a reasonable allocation among different kinds of products.Motivating by the above problem, we study the multi-product inventory problem under capacity constraints. First, we establish the inventory decision model when the demand is deterministic, and then use the Lagrange multiplier and rotation cycle method to solve the problem. Next, we innovatively apply the dual method into solve the inventory decision model with uncertain demand. By numerical experiments, we analyze the impact of parameters on the optimal solution. Based on that, we further discuss the outsourcing case. Through the Lagrange method, we solve the integrated decision-making model and derive the management insights.The results show that for the deterministic demand case, the rotation cycle method outperforms the Lagrange multiplier method. While in the uncertain demand case, the dual method can solve the problem quickly. In the outsourcing decision, we find that the firm should choose the outsourcing decision when the shadow price is higher than the purchase cost to maximize the profit.This paper could provide reasonable ordering suggestion for the company with limited capacity and help manager to determine the outsourcing decision.