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hand is ordered Fixed
Fixed-Order vs. Fixed-Time Systems
Which system would Home Depot to use for… Nails
9 Learning Objectives
Lead Time • Reorder Point
• Example Fixed-Order
Model • Safety Stock
• Example with Discrete Demand
• Example with Normal Demand
10 Stephen Shum Spring 2009 Example:
Example: Sweater (Random
Demand + Positive Lead Time)
Back to Jenny’s fashion store…
to Jenny fashion store…
– Suppose demand is random with mean 100 per week and
standard deviation 20
– Orders arrive 0.5 week after ordering
– Costs and other conditions unchanged
1) When to Reorder?
2) How Much to Order?
How Much to Order? 11 Stephen Shum Spring 2009 ROP When Demand is Uncertain
ROP When Demand is Uncertain Average demand rate d. Is ROP = dL good enough? d L Stockout!
slope d slope d Time 0
order L Place
order L Safety Stock
Inventory ROP = dL + SS
ROP by SS ROP d L
Time 0 L L Safety Stock
Safety Stock When demand has unpredictable variability, safety
stock is held to cushion against uncertainties
ROP = Average demand during lead tim...
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- Fall '09