The browser you are using is not supported by this website. All versions of Internet Explorer are no longer supported, either by us or Microsoft (read more here: https://www.microsoft.com/en-us/microsoft-365/windows/end-of-ie-support).

Please use a modern browser to fully experience our website, such as the newest versions of Edge, Chrome, Firefox or Safari etc.

A Simple Procedure for Determining Order Quantities under a Fill Rate Constraint and Normally Distributed Lead-Time Demand

På svenska

Author

  • Sven Axsäter

Summary, in English

One of the most common practical inventory control problems is considered. A single-echelon inventory system is controlled by a continuous review (R,Q) policy. The lead-time demand is normally distributed. We wish to minimize holding and ordering costs under a fill rate constraint. Although, it is not especially complicated to derive the optimal solution, it is much more common in practice to use a simple approximate two-step procedure where the order quantity is determined from a deterministic model in the first step. We provide an alternative, equally simple technique, which is based on the observation that the considered problem for each considered fill rate has a single parameter only. The optimal solution for a grid of parameter values is stored in a file. When solving the problem for an item we use interpolation, or for parameter values outside the grid special approximations. The approximation errors turn out to be negligible. As an alternative to the interpolation we also provide polynomial approximations.

Publishing year

2006

Language

English

Pages

480-491

Publication/Series

European Journal of Operational Research

Volume

174

Issue

1

Document type

Journal article

Publisher

Elsevier

Topic

  • Transport Systems and Logistics

Keywords

  • Studies
  • Stochastic models
  • Approximations
  • Parameter optimization
  • Inventory control
  • Operations research

Status

Published

ISBN/ISSN/Other

  • ISSN: 0377-2217