A NOTE ON EVALUATING INVESTMENTS IN INVENTORY SYSTEMS: A NET PRESENT VALUE FRAMEWORK

ABSTRACT

Recently, Roumi and Schnabel wrote an addendum to attempt to fill gaps found in the article by Kim, Philippatos and Chung. They claimed that the objective functions developed by Kim, Philippatos and Chung are concave. However, we present a counter example which disproves their claim. In addition, we give clarifying explanations that the unique inflection point is a global maximum even though the objective functions are not concave. Consequently, we justify the optimally of solutions derived from the first order conditions in Kim, Phillippatos and Chung.

Notes

ILKYEONG MOON is a Lecturer of Industrial Engineering at Pusan National University in Korea. He received his Ph.D. in Operations Research from Columbia University in 1991. His interests are in the areas of Production Management, Manufacturing Systems Analysis, and Production Economics. He has published in journals such as IJPk. JORS, Omega and Operations Research.

WoNYOUNO YUN is an Associate Professor of Industrial Engineering at Pusan national University in Korea. He received his Ph.D. in Industrial Engineering from Korea Advanced Institute of Science and Technology (KAIST) in 1988. His research areas are Reliability Theory, System Safety, and Quality Control. He has published extensively in IEEE Transactions on Reliability and Reliability Engineering & System Safety