THE OPTIMALITY OF THE CUT ACROSS THE BOARD RULE APPLIED TO AN INVENTORY MODEL

A common procedure in budget allocation is to let the different entiti es of an organization determine their optimal budgets. Once the indivi dual requests are received, they are then cut by a common factor, as n ecessary, so that a global constraint is satisfied. We refer to this p rocedure as the ''cut across the board'' rule. In general, this method will not result in a globally optimal solution. In this paper we iden tify conditions that assure the global optimality of the ''cut (or exp and) across the board'' rule. We specifically focus on a constrained m ulti-item inventory model and generalize results of Rosenblatt [10] an d Plossl and Wight [8]. In addition, we briefly discuss applicability of the results to other areas.