Application of the Single-Order Model to Minimize Capital Costs and Project Delays: A Case Study for High-Value Inventories in Construction Projects

This paper presents an optimization model for managing costly inventories, specifically high-voltage transformers, in electrical construction projects, aimed at minimizing capital costs and project delays. The study applies the single-period inventory model, also known as the Newsvendor model, to determine the optimal order quantity at the project's start. Sensitivity analysis is performed on several parameters to assess the impact of each attribute on the optimal order quantity. The results show that lower success probabilities and higher under-ordering costs require larger order quantities to avoid shortages. Higher scrap values also increase the optimal orders, especially when unit costs are low. These findings highlight the importance of a flexible inventory strategy tailored to project-specific factors. The paper provides construction project managers with strategies to optimize inventory management, reducing costly delays and overruns. By applying the Newsvendor model, it supports better decision-making when ordering high-value components, such as high-voltage transformers, ensuring efficient project execution.