Tradeoff Analysis for Optimal Multiobjective Inventory Model

Abstract

Deterministic inventory model, the economic order quantity (EOQ), reveals that carrying inventory or ordering frequency follows a relation of tradeoff. For probabilistic demand, the tradeoff surface among annual order, expected inventory and shortage are useful because they quantify what the firm must pay in terms of ordering workload and inventory investment to meet the customer service desired. Based on a triobjective inventory model, this paper employs the successive approximation to obtain efficient control policies outlining tradeoffs among conflicting objectives. The nondominated solutions obtained by successive approximation are further used to plot a 3D scatterplot for exploring the relationships between objectives. Visualization of the tradeoffs displayed by the scatterplots justifies the computation effort done in the experiment, although several iterations needed to reach a nondominated solution make the solution procedure lengthy and tedious. Information elicited from the inverse relationships may help managers make deliberate inventory decisions. For the future work, developing an efficient and effective solution procedure for tradeoff analysis in multiobjective inventory management seems imperative.