Fixed-Time Period Or Fixed-Order Interval Model PDF

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FIXED-TIME PERIOD OR FIXED-ORDER INTERVAL MODEL  When to order?  Order interval coincides with review period;  Order is placed when the review period (T) arrives.  How much to order?  q = variable; the order quantity varies each time an order is placed. Order quantity = expected demand during the order interval and lead time + safety stock – inventory status

q=d ( T +L) +SS−I SS=zσ d √ T + L q=d ( T + L )+ zσ d √ T + L−I Where:

q = number of units to be ordered for the next period, units

d

= average daily demand, units/day T = order interval or review period, days L = lead time, days z = number of standard deviations corresponding to a desired service level

σ d = standard deviation of daily demand, units I = inventory status, units

I=on hand +on order−backorder Desired service level = the probability that the item is available; i.e., not stockout, when needed. e.g., A desired service level of, say, 95%, means that the inventory manager desires that the inventory item is available 95% of the time that it is demanded, which is equivalent to a 5% chance of stockout....