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Please use this identifier to cite or link to this item: http://hdl.handle.net/1942/12238

Title: Holding costs under push or pull conditions - The impact of the Anchor Point
Authors: BEULLENS, Patrick
JANSSENS, Gerrit
Issue Date: 2011
Publisher: ELSEVIER SCIENCE BV
Citation: EUROPEAN JOURNAL OF OPERATIONAL RESEARCH, 215 (1). p. 115-125
Abstract: Holding costs are traditionally determined from the investment in physical stock during a cycle. An alternative approach instead derives holding costs from Net Present Value (NPV) functions. It is known that applying both frameworks to the same system can lead to different holding cost valuations, but little explanation has been offered. By introducing the Anchor Point in a model, this paper shows, for four different systems, that traditional holding cost models (implicitly) assume pull conditions, while current NPV approaches model push conditions. This explains in part the differences between the methods. It is shown that the Anchor Point concept allows the construction of NPV models under pull conditions, giving results in better correspondence with traditional models. The traditional framework is restricted to pull conditions and important considerations could be easily overlooked, leading to wrong valuations of holding costs. NPV seems superior as such considerations are automatically incorporated. The application to multi-echelon inventory systems provides interesting insights on the roles of echelon stocks and lead-times, and offers potential for future research. (C) 2011 Elsevier B.V. All rights reserved.
Notes: [Beullens, P] Univ Southampton, Sch Management, Sch Math, Southampton SO17 1BJ, Hants, England [Janssens, GK] Hasselt Univ, Transportat Res Inst IMOB, BE-3590 Diepenbeek, Belgium P.Beullens@soton.ac.uk; gerrit.janssens@uhasselt.be
URI: http://hdl.handle.net/1942/12238
DOI: 10.1016/j.ejor.2011.06.005
ISI #: 000294394700013
ISSN: 0377-2217
Category: A1
Type: Journal Contribution
Validation: ecoom, 2012
Appears in Collections: Research publications

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