Selecting the Best Lengths to Stock

Abstract

A compact method has been developed for solving the following frequently occurring inventory problem: Given a list of lengths and either the known or the expected demand for each length (because of storage limitations or manufacturing economies, only a few of these lengths are to be made and stocked). Any required length not in stock will be cut from the next longer length, with an attendant cutting loss. Select that particular set of R lengths that will minimize the cutting losses. The method actually finds the minimum cutting loss for an entire range of R's. By weighing the cutting loss for each additional stored length against the added manufacturing and storage cost, management can better determine how many and which lengths to stock.