7. Multi-item Inventory Models Subject to Constraints

The inventory models discussed in the previous chapters assumed a single item being managed. Inventory managers at warehouses and retail shops manage a large number of items in their inventory. Inventory decisions – such as timing of replenishment orders, determining order quantities – are not made for each item independently. Decisions are often made jointly for several items managed at one location. Such decisions may be constrained by either the value of inventory they can hold in stock, or the availability of space to stock the items in their warehouse, or some other similar scarce resource. In this chapter, we discuss multi-item inventory models that are subject to one or more resource constraints such as budget, space, or number of orders. We also discuss methods of treating inventory problems that are subject to more than one constraint. Later in this chapter, we discuss another point of interest to inventory managers – that of optimizing the inventory costs by replenishing jointly to derive the benefits of economies of scale.