A Comparative Analysis of Inventory Cost Equation Considering Shortage and Backlogging Cost

Abstract

Inventory plays a new foreword for observing responsiveness and efficiency, which will have an ultimate payoff for supply chain advancement. Shortage costs generate barriers to construct customer confidence. Furthermore, many organizations need to deepen their strategy to lighten their aggregate cost. In this research paper, two investigations based on shortage cost and backlogging cost have been examined. The stochastic model is used to find out the total supply chain cost. Few equations were revealed to discover ordering quantity Q and reordering quantity R. In the shortage cost paper, Leibnitz theorem was used to get a shortage amount. Penalty cost was also measured if the shortage occurs. Both certainty and uncertainty demand were considered. In the backlogging cost, absolute stock helps for finding the impact of absolute stock cost streamlining and furthermore decides the ideal reorder amount/request amount or (Q, R) stock framework strategies. In both two papers, the sensitivity analysis was done by MATLAB, and the graph was found from this.