Determination of Optimum Quantity Cost and Cycle Time Using Inventory Model with Stock Level Dependent Demand Rate and Variable Holding Cost. (A Case Study of Mantrac Ghana Limited).

Abstract

An inventory represents one of the most important assets that most businesses possess. The turnover of an inventory represents one of the primary sources of revenue generation and subsequent earnings for the company's shareholders/owners. However, if an inventory is not properly managed, it could adversely affect the company. This paper sought to model Mantrac Ghana Limited's inventory cost as a retroactive holding cost, so as to determine the optimal order quantity, reorder point and optimal total cost of the company. The researchers obtained data from the Inventory Department of Mantrac Ghana Limited on stock, demand and supply of Hoses covering a period of six years on monthly basis. Retroactive Holding Cost solution algorithm was used to solve the problem. To carry out the computations, the computer software, Derive 6, Minitab 16 and Matlab were used to analyze the problem. The research revealed that low quantity cost with corresponding higher cycle times results in Low Total Inventory Cost. The higher the optimum cost, the higher the Total Inventory Cost. It was also shown that the inventory of Mantrac Ghana Limited could be sustained if the stakeholders of the company adopt the Retroactive Holding Cost Model to produce the quantity Q * , of 409 units per each order within the cycle period of 0.2 year.