Materials Receiving Capacity and Inventory Management

This paper analyses the optimal level of materials receiving capacity for a manufacturer that receives deliveries from many suppliers. Inventory levels and inventory carrying costs depend on the frequency of deliveries and thus, on the materials receiving capacity. An analytic model that captures the tradeoff between inventory costs and materials receiving costs is presented and discussed. The receiving cost is modeled as increasing in discrete jumps of varying sizes whenever materials receiving resources are added. Practical issues in implementing the model are highlighted and methods to reduce the marginal materials receiving cost are discussed. The paper also discusses connections to the JIT approach for production environments where materials receiving is heavily automated.