Optimization of the order size concerning losses from the immobilization of working capital in the reserves of material resources

The article discusses approaches to optimizing stocks in the supply chains of large industrial companies. The relevance of this issue concerns primarily the supply of the most expensive categories of material resources, when calculating the order size it is necessary to additionally take into account losses from the immobilization of working capital (opportunity costs). In practice of home and foreign companies, modifications of the optimal order size formula are widely used, with the help of which companies achieve an economic compromise between the level of availability of stocks in the warehouse and the costs of their purchase and maintenance. At the same time, the losses from immobilization, in some cases, can significantly impact the levels of the company's warehouse stocks (including insurance), and hence the need for logistics infrastructure facilities, such as warehouses, handling equipment etc. To date, there is no unified methodology for assessing losses from the immobilization of working capital in stocks, due to the specifics of companies’ activities in different industries and types of business. In this connection, approaches to the choice of rates for determining the amount of such losses and assessing their impact on the efficiency of companies’ activities are significantly different. Correct accounting of opportunity costs can be used in the development of diversified approaches to planning the need for warehouse stocks, which will allow, on the one hand, to satisfy the orders of internal and external customers, and on the other hand, to prevent the formation of excess stocks. Therefore, the issue of developing industry methods for an adequate assessment of financial losses when working with stocks of material resources is relevant.

Keywords

losses from immobilization; working capital; inventory management; order size optimization; asset turnover; opportunity cost; lost profit; logistics and supply chain management

Received

30.10.2023

Publication date

28.12.2023

Number of characters

30486

Cite

GOST	Elyashevich I. Optimization of the order size concerning losses from the immobilization of working capital in the reserves of material resources // Ekonomika i matematicheskie metody – 2023. – V. 59. – no. 4 C. 100-110 [Electronic resource]. URL: https://emm.jes.su/S042473880028219-9-1 (circulation date: 03.07.2024). DOI: 10.31857/S042473880028219-9
MLA	Elyashevich, Ivan "Optimization of the order size concerning losses from the immobilization of working capital in the reserves of material resources." Ekonomika i matematicheskie metody 59.4 (2023):100-110. DOI: 10.31857/S042473880028219-9
APA	Elyashevich I. (2023). Optimization of the order size concerning losses from the immobilization of working capital in the reserves of material resources. Ekonomika i matematicheskie metody 59(4), pp.100-110 DOI: 10.31857/S042473880028219-9

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