Inventory Control Guide Page 35
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40Periodic Review
Let us try to summarize the ins and outs of the problem.
Assumptions
1.
Constant random demand: D
2.
Lead time (Lt > 0)
3.
Review time (Rt > 0)
Costs
holding costs:
H
money / (item . time)
order costs:
O
(money)
penalty costs:
P
(money / item)
Service
Stockout frequency f or Fill rate β β β β
We are given either some penalty cost to minimize or a service level or fill rate to reach.
Decision
Select Q
i
Most often the lot size is not kept constant and you are allowed to order a quantity which
depends on the current state of your inventory. However, there are cases where the order lot
size is fixed. This happens typically when the review period is short (one day, for example).
Objective
Minimize the total costs or
Guarantee a service
Since we have only one variable, we cannot aim at different objectives at the same time. Let
us consider briefly two cases.
Prod 2100-2110
Inventory Control
34
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