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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

Author

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  • E A Silver

    (University of Calgary)

  • H Naseraldin

    (University of Calgary)

  • D P Bischak

    (University of Calgary)

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.

Suggested Citation

  • E A Silver & H Naseraldin & D P Bischak, 2009. "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," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 60(9), pages 1244-1253, September.
    • Handle: RePEc:pal:jorsoc:v:60:y:2009:i:9:d:10.1057_palgrave.jors.2602655
    DOI: 10.1057/palgrave.jors.2602655
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    References listed on IDEAS

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