Inventory Valuation Under Cyclical Demand: A Modelling Approach

Abstract

Traditional EOQ models are limited in use because of the constant demand assumption. Firms rarely face constant demand and, therefore, these firms have restrictive use for the EOQ model. The proposed MIPM model in contrast can project orders and schedules for both variable and constant demand. The MIPM model capitalizes on state of the art programming techniques and current computer software. It permits firms to determine the minimum inventory costs in all product demand situations. In addition, it can be used to improve cash planning and to assist in optimized product contribution to firm profits through sensitivity analysis.