Student version - Ch5 - part 3

Assume deterministic lead time lt time inventory q q

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Assume deterministic lead time: LT Time Inventory Q Q LT LT LT Q Shortage occurs when the demand during lead time exceeds ROP . Order quantity is fixed, order interval varies. What should be the value of Q ? IL IP What should be the value of ROP ? EOQ or Truck load or based on experience Demand during LT, Service Level Lead time LT Time between placing and receiving order. On Hand Inventory O H Physical stock Inventory Level IL IL = OH Quantity on backorder Inventory Position IP IP = IL + Quantity in transit
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Review of Terms Mean average Standard deviation is a widely used measurement of variability or dispersion used in statistics. It shows how much variation there is from the mean . Z score In statistics, a standard score indicates how many standard deviations an observation or datum is above or below the mean. Service Level (SL) The desired probability of not running out of stock in any one ordering cycle.” “The probability that demand will not exceed supply during lead time”“ the amount of stock on hand will be sufficient to meet demand.” A SL of 95% implies that there is a 95% probability that demand will be satisfied thus a 5% risk of a stock out. 20
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