A Plant-Warehouse System with Variable Lead-Times and Variable Re-Order Levels: The Cost Optimization—COPT—System

An analyst, in approaching the design of an integrated factory warehouse decision system, finds out that existing operations research theory concentrates on the rigorous solution of only limited and selected segments of the complex relationship between production and distribution. The fixed or economic order quantity re-ordering practice most frequently discussed in O/R literature results in an undesirable fluctuation in orders at the plant. If the manufacturer owns both the plants and the warehouses, he must incorporate an order smoothing decision rule into his system which must necessarily modify the size of the economic order quantity.

The fixed re-order point (or trigger point) is likewise an undesirable restriction on the operation of a system attempting to optimize both factory and distribution costs. At the times when the sales rate is below the rate of production a particular re-order point may not be reached at all. Conversely, at times of high sales, the re-order point may be reached repeatedly with the ultimate consequence of lengthening the lead times at the plant.

Management Technology, ISSN 0542-4917, was published as a separate journal from 1960 to 1964. In 1965 it was merged into Management Science.