Multi-Item Inventory Aggregation into Groups

The problem of grouping the many items in stock into a few groups with the provision of a common order cycle or common order quantity per group is modelled as a dynamic program. It is shown that by a simple reorganization of the stock items, the computation time of the dynamic program can be reduced to a manageable size. Further the order cycle grouping is shown to be, usually, superior to the order quantity grouping scheme. Also, the composition of the order cycle grouping is found to be remarkably close to that of the well known A/B/C system of stock control therby giving theoretical credence to that system.