A computational model for inventory management and planning

Ayub, Mehar and Ahsanuddin, Muhammad (2000): A computational model for inventory management and planning. Published in: Conference Proceedings, Cambridge University , Vol. 1, No. 2 (2006): pp. 1-13.

Abstract

The objective of the study is to determine the factors of the optimal level of merchandizing inventory. The study is based on a mathematical model. The results revealed some interesting findings. The most important conclusion is that the 'Usage of Material' or the Sales Volume is not the real determinate of the inventory volume. It is concluded in the model that the volume of inventories depends on the difference between the return on investment in the inventories and the rate of interest on short-term deposits. The traditional methods in cost accounting - Buffer Stock and Economic Order Quantity - have been reconciled with the profit maximization hypothesis.

• Item Type: MPRA Paper
• Language: English
• Keywords: Inventory Control; Economic Order Quantity; Buffer Stock; Baumoul's Model; Optimization; Material Cost Accounting
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C61 - Optimization Techniques ; Programming Models ; Dynamic Analysis; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M4 - Accounting and Auditing > M41 - Accounting

References

1. AICPA, 1986 “Accounting Trends and Techniques”, New York, The American Institute of Certified Public Accountants. 2. Altman, Edward, 1968 “Financial Ratios Discrimination Analysis and the Prediction of Corporate Bankruptcy”, Journal of Finance, September 1968, 589-609. 3. Karachi Stock Exchange (1980-1994), "Annual Reports of the Companies". Karachi. 4. Baumol, William, 1952 “The Transaction Demand for Cash: An Inventory Theoretic Approach”, Quarterly Journal of Economics, November 1952, 545-556. 5. Brackus D., Brainard W.C., Smith G., ant Tobin J., 1980 “A Model of US Financial and Non-financial Economic Behavior”, Journal of Money, Credit and Banking, 1980 (12), 259-293. 6. Government of Pakistan, Various Issues, “Statistical Year Book of Pakistan”, Islamabad, Federal Bureau of Statistics. 7. Matz, Curry, Franks and Khan, A.R. (1982); "Cost Accounting: An Emphasis to Management", Karachi : ICMAP. 8. Mayer C.,1988 “New Issues in Corporate Finance”, European Economic Review, 1988, 1167-1189. 9. Mehar, M. Ayub K., 1994, "A Simulation Model of Corporate Finances: A Study of Companies Listed on the Karavhi Stock Exchange", Karachi. Ph.D. Dissertation. 10. Mehar, M. Ayub K., 1992 “ A Forecasting Model of Public Finance: An Experience from the Pakistan Economy”, M. Phil Dissertation, Karachi: AERC. 11. Mehar, M. Ayub K., Sohail Javed, and Samina Aijaz, 1993, “Short Term Financing, Accounts Receivables, and Liquidity Position of the Firm”, Pakistan Economic and Social Review, 1993 (2). 12. Mian L.Shehzad, and Clifford W. Smith, 1992, “Account Receivable Management Policy: Theory and Evidence”, The Journal of Finance, 1992 (1), 169-200. 13. Myers, S. 1977; “Determinants of Corporate Borrowing”; Journal of Financial Economics, 1977 (November) 145-177 14. Myers S.C; 1984; “Capital Structure Puzzle”, Journal of Finance, July 1984, 575-592. 15. Robert B. Anthonyson and J. Philip Cooper, 1982, “Simulation Model for Corporate Planning”, Cambridge, Mass. Dynamic Associates Incorporated, 1982. 16. Smith, Cliord W., Jr., and Ross L. Watts, (1992), " The Investment Opportunity Set and Corporate Financing, Dividend and Compensation Policies", Journal of financial Economics, 32, 263-292 17. Smith, Janet Kiholm, 1987, “Trade Credit and Informational Asymmetry”, Journal of Finance, 1987 (62), 863-871. 18. Smith, Keith,1980, “Readings on the Management of Working Capital”, West Publishing Company. 19. State Bank of Pakistan, (Various Issues), "Annual Report ", Karachi . 20. State Bank of Pakistan, Various Issues, “Balance Sheet Analysis” Karachi: The State Bank of Pakistan. 21. Stern, Andrew (1993),"Inventories in US Parent Companies and their Foreign Affiliates: An Analysis of Recent Data"; Applied Economics. 1993 (25), 335-342. 22. Stulz, Rene M. and Herb Johnson (1988), “ An Analysis of Secured Debt”, Journal of Financial Economics, 14; 501-522. 23. Tobin, J., 1958, “Liquidity Preference as a Behavior Towards Risk”, Review of Economic Studies, February 1958, 65-86.