A simple approach to an integrated single-vendor single-buyer inventory system with shortage

In this article, a simple approach with two basic inequalities (Cauchy-Schwarz inequality and arithmetic-geometric mean inequality) is used to solve the integrated single-vendor single-buyer inventory problem developed by Wu and Ouyang (2003). Without the method of completing perfect square, the proposed approach yields the global minimum of the integrated total cost per year more easily than the algebraic approach used by Wu and Ouyang (2003). In addition, for people without the background of calculus, it is more useful to determine the buyer's economic order quantity and the vendor's optimal number of deliveries.