Price-directed control of remnant inventory systems

Motivated by make-to-order cable manufacturing, we describe a remnant inventory system in which orders arrive for units of raw material that are produced-to-stock. As orders are satisfied, the partially consumed units of material, or remnants, are either scrapped or returned to inventory for allocation to future orders. We propose an IF-based, price-directed scheme for minimizing the long-run average scrap rate subject to meeting order demand rates and assuming units that cannot eventually be allocated are scrapped. Dual prices from a long-range linear program yield objective coefficients for the IP.