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Optimising safety stocks and reorder points when the demand and the lead-time are probabilistic in cement manufacturing

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  • Karzan Mahdi Ghafour

Abstract

Inventory control is an extremely challenging task, complicated by a probability of demand and lead-time. An inventory system attempts to balance between overstock and understock to reduce the total cost and achieve customer demand in a timely manner. The optimality of inventory policies for a cement industry is still unknown for many types of inventory systems. In this paper, probability distribution of demand during lead-time is considered when the demand and lead-time are probabilistic while extracting the optimal safety stock placement and the reorder point in cement manufacturing. Probability distributions of demand during lead-time include Pearson type 6 four-parameter, log-Pearson 3, fatigue life (Birnbaum-Saunders), and inverse Gaussian three-parameter distributions. The probability distribution of demand during lead-time is established when the demand and the lead-time are probabilistic; each one has a probability distribution function. The safety stock depends on the safety factor under certain service level and the standard deviation of demand during lead-time which can be obtained from the distribution. The quantities of the safety stock and the reorder point represent an optimal value at each position to avoid over or under stock, the most controversial issue in the inventory system.

Suggested Citation

  • Karzan Mahdi Ghafour, 2018. "Optimising safety stocks and reorder points when the demand and the lead-time are probabilistic in cement manufacturing," International Journal of Procurement Management, Inderscience Enterprises Ltd, vol. 11(3), pages 387-398.
    • Handle: RePEc:ids:ijpman:v:11:y:2018:i:3:p:387-398
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    Cited by:

    1. Karzan Mahdi Ghafour & Abdulqadir Rahomee Ahmed Aljanabi, 2023. "The role of forecasting in preventing supply chain disruptions during the COVID-19 pandemic: a distributor-retailer perspective," Operations Management Research, Springer, vol. 16(2), pages 780-793, June.
    2. Barros, Júlio & Cortez, Paulo & Carvalho, M. Sameiro, 2021. "A systematic literature review about dimensioning safety stock under uncertainties and risks in the procurement process," Operations Research Perspectives, Elsevier, vol. 8(C).

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