Determining the reorder point and order-up-to-level in a periodic review system so as to achieve a desired fill rate and a desired average time between replenishments

Edward A. Silver · Hussein Naseraldin · Diane P. Bischak

31 citations0/0 files storedJournal of the Operational Research Society

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Supply Chain and Inventory Management Reliability and Maintenance Optimization Management and Optimization Techniques

Abstract

In this paper we consider a periodic review, reorder point, order-up-to-level system, a type commonly used in practice. Motivated by a specific practical context, we present a novel approach to determining the reorder point and order-up-to-level (for a given review interval) so as to target desired values of (i) customer fill rate and (ii) average time between consecutive replenishments. Specifically, by using a diffusion model (producing normally distributed demand) we convert a periodic review, constant lead time setting into one having continuous review and a random lead time. The method is simple to implement and produces quite reasonable results.

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References

1983Simulation Modeling and Analysis.1999Simulation modeling and analysis 1999Inventory management and production planning and scheduling 1991Finding Optimal (s, S) Policies Is About As Simple As Evaluating a Single Policy 1968Decision Rules for Inventory Management 1979The Power Approximation for Computing (s, S) Inventory Policies 1998Optimization of (s, S) Inventory Systems with Random Lead Times and a Service Level Constraint 1984Simple approximations for the reorder point in periodic and continuous review (s, S) inventory systems with service level constraints

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