A Procedure, Involving Simulation, For Selecting The Control Variables Of An (S, c, s) Joint Ordering Strategy*

This paper considers an inventory situation where the control procedure is dependent in nature, i.e. an item that would not be ordered at a particular point in time if it was being controlled independently, is allowed to be included in a replenishment triggered at that moment by the necessity of ordering another item. In particular, we develop a procedure for selecting the control variables (order-up-to-levels, can-order points, and must-order points) of an {S, c, s) system. The procedure, iterative in nature, is a combination of mathematical optimization and simulation. The cost savings over a usual independent inventory system are demonstrated.