Decision on Retention of Excess Stock

Abstract

Simpson derived a formula for making decisions on the retention of excess stock having a constant probability of obsolescence and deterioration. The general problem of determining an economic retention period for excess stocks, when the shelf-life of the material follows some general probability distribution, is considered in this paper. A particular case in which the shelf-life follows the exponential distribution is derived. It is indicated that the relevant equation can be solved by a trial-and-error method even for the most general case with the help of truncated distribution of shelf-life.