Raw material inventory optimization for MTO enterprises under price fluctuations

Abstract

Rapidly changing market environment cause raw materials price fluctuations, it is very difficulty for many manufacturing enterprises to make appropriate purchasing strategy aim at management actual. Accordingly, raw materials inventory optimization has become an important research question for MTO enterprises which is one of special manufacturing enterprises. Current literature researches either assumed all product orders can be met or ignored, which is inconsistent with MTO enterprises actual. It is groping direction of the paper that how to introduce customer order rates into raw material inventory optimization model and to make it between an given interval suitable for MTO enterprise’s actual situation, since the shortcoming appeared in previous researches. The model under raw materials price fluctuations for MTO enterprises with the goal of total costs minimal includes decision variables Q, the constraint. Total costs were composed of fixed order costs, purchasing costs and shortage of punishment costs. Then designed approximate algorithm GA, and analyzed approximation ratio, which showed time complexity is o(n4), where n is the number of raw materials. At last take Xi’an & Control Equipment Co. Ltd. as an example, confirmed the model and algorithm effective.

Keywords:

• Price fluctuation
• Raw material inventory
• Make to order
• Customer order fill rate