Optimal Cycle Service Level for Continuous Stocked Items with Limited Storage Capacity

Abstract

This paper involves determining an optimal cycle service level for continuously stocked items that explicitly considers storage space capacity. Inventory management is under a continuous review policy. The total inventory management cost consisting of ordering cost, inventory holding cost, shortage cost, and over-capacity cost. Shortage items are assumed to be backlogged. A numerical example is provided to demonstrate the method. Keywords: Continuous Review; Cycle Service Level; Storage Space Capacity; Over-Capacity Cost