Gather economic inputs:
a) selling price,
b) production/procurement cost,
c) salvage value of inventory
2. Generate a demand model to represent demand
a) Use empirical demand distribution
b) Choose a standard distribution function: the normal distribution
and the Poisson distribution – for discrete items
3. Choose an aim:
a) maximize the objective of expected profit
b) satisfy a fill rate constraint.
4. Choose a quantity to order.
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