An Inventory Optimization Model for a Textile Manufacturing Company

Abstract

Inventory management is a crucial issue in most businesses from factories in industry to small and large organizations in the production or service sector. A company should determine an optimum inventory level between excessive inventory that takes up physical space, costs much, and lack of inventory which disrupts the supply chain causing unavailability of the product that makes customers change their idea and buy from another supplier. In this study, we first classify the items that the company manufactures by using ABC analysis and develop a mathematical model to minimize total cost to enable a better inventory management. We use ABC analysis method to evaluate products in a textile company in terms of importance and to track these products according to their priorities. Accordingly, we propose a mixed integer programming model to determine production quantities and inventory levels with minimum cost. The results shows that the company in concern can improve its total production and inventory costs by 3.8 percent.