INVENTORY MANAGEMENT FOR MARGIN MANAGEMENT SYSTEM

Abstract

We examine various inventory management models and identify a best practice for Acceval™s Margin Management System. With simulated annealing and binary search, we develop two effective and efficient algorithms to solve the dynamic programming procedure of a single product, periodic review, finite horizon model and compute the optimal policy under both stochastic additive demand and stochastic multiplicative demand. We also formulate an alternative fixed price policy and compare it with the policy to investigate their empirical performances. After discussing the limitations of the model, we propose two possible improvements for implementing the model as a prototype of the supply chain optimization model for Acceval™s Margin Management System.