Warehouse Management Problem

1.1 GENERAL INTRODUCTION

Increasing evidence suggests the success of most world-class companies is due in grand part to a skillful management of “inventories, capacity utilization, and randomness in the production environment. Not surprisingly, these three areas have become the target of major continuous improvement efforts in a large number of western business organizations. However, the fact is that operations research studies dealing with the interaction of these three factors seem to be more the exception than the rule. The inventory control has a long time been a very classical OR problem. Since 1913 with Harris, a great number of OR researchers have studied this subject. From the available literature, it seems that inventory problems

Concerning inventory management, managers must decide which product, and how much of each product need to be stored in the warehouse. All those decisions are interrelated but are dealt independently. Up to now, warehouse and inventory issues are handled in a pyramidal top-down approach where the flexibility of decisions decreases from top to bottom. Strategic decisions are first taken and then create limits to decisions taken at the tactical and operational levels. For example, once the size and the design of the warehouse are fixed, these decisions will have to be respected when replenishment policies have to be designed as well as when the size of the different warehouse areas has to be optimized. On top of this, decisions taken at each level of the pyramid are also handled independently and

Here the total cost is comprised of replenishment cost, carrying cost, shortage cost, and conveyance cost.” Hence, the total cost of warehouse can be defined as