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

E A Silver, H Naseraldin () and D P Bischak ()
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E A Silver: University of Calgary
H Naseraldin: University of Calgary
D P Bischak: University of Calgary

Journal of the Operational Research Society, 2009, vol. 60, issue 9, 1244-1253

Abstract: 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.

Keywords: inventory control; heuristics; stochastic; diffusion process; supply chain management (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (5)

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DOI: 10.1057/palgrave.jors.2602655

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