Dynamic and stochastic behavior of coefficient of demand uncertainty incorporated with EOQ variables: An application in finished-goods inventory from General Motors׳ dealerships

The objective of this paper is to investigate finished-goods inventory in the U.S. automobile industry using an econometric method known as the variable mean response (VMR) estimation. The research uses the classical economic order quantity (EOQ) model as a starting point. Different from the usual form of the model, here we relax certain assumptions inherent to the EOQ and treat demand as uncertain rather than deterministic. In this research, eight models are developed and applied empirically. The results of the proposed models and methodology provide inventory decision-makers with different managerial implications and strategic improvements. Overall, the empirical results demonstrate many avenues for considering new inventory policies.