A Model with Storage Limitation and Simulated Demand as Fresh Meat Inventory Management Support

An important aspect of retail outlets which offer different kinds of fresh meat is the careful planning of inventory. In this context, inventory management includes ensuring the required quantity of meat, storing it in an adequate way, and also minimizing the setup cost, holding cost, shortage cost and possible losses that might occur if the goods remain unsold. By devising and applying appropriate models companies can significantly improve their decision making connected to harmonizing the demand and different inventory costs. This paper presents an inventory model with limited storage space, characterized by the estimate of meat demand based on simulated values generated by computer from beta distribution. If the determined quantities exceed the available storage space, the Lagrange multiplier which allows for simultaneous decrease of the originally established values, could be used in the model. This eventually results in the optimum order quantity of different meat products, as well as the associated total storage costs.