Determining the reorder point and order-up-to level to satisfy two constraints in a periodic review system under negative binomial demand

E A Silver, D P Bischak and T de Kok
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E A Silver: Haskayne School of Business, University of Calgary, Calgary, Canada
D P Bischak: Haskayne School of Business, University of Calgary, Calgary, Canada
T de Kok: Technische Universiteit Eindhoven, Eindhoven, the Netherlands

Journal of the Operational Research Society, 2012, vol. 63, issue 7, 941-949

Abstract: In this paper we consider an inventory management problem motivated by a specific practical context that concerns the commonly used periodic review, reorder point, order-up-to-level control system. In particular, the reorder point and order-up-to level have to be selected so as to satisfy two management-specified constraints. First, from a marketing (or, more generally, a business) perspective, the actual fill rate achieved must be no lower than a prescribed value. Second, for production or supply purposes, the average time between consecutive replenishments must be as close as possible to a target value. The demand distribution considered is the negative binomial. An efficient procedure is developed with illustrations.

Date: 2012
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